CLASSIFYING RISK–CHURCHES/HOUSES OF WORSHIP

(April 2019)

INTRODUCTION

Some churches have very small memberships, and some have very large memberships. Some don’t have their own permanent space but instead occupy spaces made available to them in shopping centers, schools, YMCA's, funeral homes, movie theaters, or other facilities that have the space or accommodations needed. Some may be tenants in building owned by others. Others own their own buildings but have only enough space to worship while others may occupy much larger buildings with space for classrooms, fellowship halls, gymnasiums, administrative offices, and more, including restaurants! Synagogues, mosques, and other houses of worship also come in several sizes and offer a variety of services.

CLASSIFICATION

Class Code 41650: Churches or Other Houses of Worship is the classification that applies to all churches and houses of worship, regardless of the size of the congregation or the setting where services occur. Three accompanying notes seem to do little to distinguish between them.

• Burial sites (cemeteries) located on the same premises are included without an additional premium charge.

However, if the cemetery is across the road, or if the church relocates to a different location and leaves the cemetery behind, it is assigned the cemetery code and rated separately.

• Church members and certain officials are included as additional insureds using CG 20 22–Additional Insured–Church Members and Officers.

The wording in the note refers to “church members” so those who attend services but do not join are not insureds.

• Camps and private residences must be classified and rated separately. However, no charge is made if a member of the clergy and his or her family occupies the private residence. There is also no charge if religious members and their families occupy a private residence the church owns. Religious member is not defined. Residences the church owns that others occupy are separately classified and rated.

All things considered, this doesn't seem quite fair, does it? The one-day-a-week, morning-worship-only church pays the same as the seven-day-a-week church with multiple activities and exposure to loss.

SEPARATING OUT ACTIVITIES

The ISO Premium Audit Advisory Service (PAAS) agrees that not all churches are the same. The approach recommended in the manual is to charge separately for activities that generate funds for the congregation such as day care, bake sales, carnivals, bazaars, craft shows, and sponsored meals.

How can this be justified when the notes don't say to make separate charges? Refer to the General Liability Manual Rule 25 called Classifications. Section B. Assignment of Classifications explains how to classify a risk. It states that more than one classification assignment may be necessary for risks with multiple business operations.

As an example, nursery and child-care facilities for children of parents who participate in worship and educational opportunities in churches or other houses of worship are treated as part of the church operations and are not separately classified and rated. However, when a church operates a day care that is operated separately and apart from core church activities and generates income it must be rated using a separate classification.

Many churches have become involved in community activities separate from and in addition to their normal activities. Even though these are faith-based and take place in the church, they must be classified and rated separately when they generate revenue. For example, the free after-school program at a church is included in the church classification without an additional charge. However, the after-school program that is operated under government auspices and receives government funding must be classified and rated separately. Schools the church operates that are open to the general public are classified and rated separately but schools that are run solely for the benefit of church members and for which no charge is made, are not.

Counseling is another example. Clergy have always provided counsel for members; some churches are providing counseling centers that offer a range of services for a fee. Clergy or others may be hired specifically to operate a fee-paid freestanding counseling operation or that function along with other counseling activities. Separate classification and premium charges may be in order, depending on the scope and nature of the counseling services offered.

SUMMARY

In most cases, a church or house of worship is not a business. However, they become businesses when they add activities and operations that are subject to fees and these additional exposures must be addressed, classified, and rated for separately.