Protecting Your Ministry Volunteers: Ensuring Liability Coverage Under California Law

How To Protect Your Ministry Volunteers Under Your Liability Policy

Churches and other religious nonprofit corporations greatly benefit from the services of volunteers. But, what happens when an individual files a lawsuit against a volunteer director or officer for acts they performed in furtherance of the organization’s mission? Will the ministry’s insurance policy cover the volunteer, or will the volunteer’s personal assets be targeted? This article seeks to provide churches and religious nonprofits with an overview of best practices under California law for maintaining an insurance policy that protects volunteers from personal liability.  

California Corporations Code § 9247: Protecting Your Ministry's Volunteers

California Corporations Code § 9247(b) defines a “volunteer” as someone who “render[s] services without compensation.” (Cal. Corp. Code § 9247(b).) These definitions inherently encompass members of the church or local community who serve in the children’s ministry, at ministry-based food pantries, etc. However, a Board member, director, or officer of a church or a ministry may also be considered a “volunteer” under the Code if they offer their services free of charge. Section 9247(c) defines an “executive officer” as “the president, vice president, secretary, or treasurer of a corporation, or other individual serving in like capacity, who assists in establishing the policy of the corporation.” (Cal. Corp. Code § 9247(c), internal quotations omitted.) Overall, Code section 9247 protects both volunteers and executive officers from personal liability for their negligent acts in lawsuits filed by third parties if the following conditions are met:

“(1) The act or omission was within the scope of the director’s or executive officer’s

duties;

(2) The act or omission was performed in good faith;

(3) The act or omission was not reckless, wanton, intentional, or grossly negligent; and

(4) Damages caused by the act or omission are covered pursuant to a liability insurance policy issued to the corporation, either in the form of a general liability policy or a director’s or officer’s liability policy, or personally to the director or executive officer. In the event that the damages are not covered by a liability insurance policy, the volunteer director or volunteer executive officer shall not be personally liable for the damages if the board of directors of the corporation and the person had made all reasonable efforts in good faith to obtain available liability insurance.”

(Cal. Corp. Code § 9247(a).)

Maintaining Adequate Insurance Coverage for Volunteer Directors

In other words, if the volunteer director’s act causing damages to a third party was unintentional, a commercial general liability (“CGL”) policy and a directors’ and officers’ liability (“D&O”) policy should be maintained to ensure coverage and provide a legal defense for the volunteer director. Procuring a policy would also avoid the risk of having a court decide whether the Board “made all reasonable efforts in good faith to obtain available liability insurance,” a subjective standard. (Cal. Corp. Code § 9247(a)(4).)

What happens when a lawsuit is filed not only against an individual volunteer but also against the corporation for which the volunteer renders services? California Corporations Code § 5047.5 addresses this issue, providing minimum insurance coverage requirements for volunteer directors and officers to be protected for claims relating to the liability of the corporation itself. Section 5047.5(e)(1) explains that “If the corporation’s annual budget is less than fifty thousand dollars ($50,000), the minimum required amount is five hundred thousand dollars ($500,000).” (Cal. Corp. Code § 5047.5(e)(1).) The same section also indicates that, “If the corporation’s annual budget equals or exceeds fifty thousand dollars ($50,000), the minimum required amount is one million dollars ($1,000,000).” (Cal. Corp. Code § 5047.5(e)(2).) If these minimum policy limits are in effect, any action for monetary damages should not be sustained against a volunteer “on account of any negligent act or omission occurring (1) within the scope of that person’s duties as a director acting as a board member, or within the scope of that person’s duties as an officer acting in an official capacity; (2) in good faith; (3) in a manner that the person believes to be in the best interest of the corporation; and (4) is in the exercise of his or her policymaking judgment.” (Cal. Corp. Code § 5047.5(b).) Notably, a volunteer director or officer will not be immune from liability in any action brought by the California Attorney General or any action alleging self-dealing transactions, conflicts of interest, disputes over a charitable trust, or fraudulent acts, among other things. (Cal. Corp. Code § 5047.5(c).)

Thus, in the best interests of your ministry and your volunteers, it would be prudent to obtain a $500,000 liability policy (for smaller organizations) or a $1 million policy (for larger organizations). As recognized by the California legislature itself, “[T]he services of directors and officers of nonprofit corporations who serve without compensation are critical to the efficient conduct and management of the public service and charitable affairs of the people of California . . . . The unavailability and unaffordability of appropriate liability insurance makes it difficult for these corporations to protect the personal assets of their volunteer decisionmakers with adequate insurance. It is the public policy of this state to provide incentive and protection to the individuals who perform these important functions.” (Cal. Corp. Code § 5047.5(a).)