Insurance for Sex Abuse A Policy Tailor-Made for the Catholic Church., by Michelle Tsai, Slate, July 16, 2007

Insurance for Sex Abuse
A Policy Tailor-Made for the Catholic Church

By Michelle Tsai
Slate
July 16, 2007

http://www.slate.com/id/2170482/

Over the weekend the Archdiocese of Los Angeles agreed to pay $660 million to settle lawsuits from hundreds of sex-abuse victims. About $250 million will come out of the diocese bank account; $60 million will come from other religious orders and another $123 million from litigation with orders that chose to sit out the deal. Insurance companies will pay the remaining $227 million. Hold on—can churches buy insurance for sex abuse?

Los Angeles Cardinal Roger Mahony.

Yes. Like any business, churches, synagogues, and other religious organizations purchase insurance to protect themselves from lawsuits, like discrimination claims or negligence charges against officers. Since the spike in sex-abuse lawsuits in the mid-1980s, churches have also had the option to take out extra liability policies for damages related to sexual misconduct. These policies don't come cheap, and they protect just the institutions, for the most part. Insurers will mount a legal defense for accused individuals, but the support extends only so far: Perpetrators are on their own if they're found guilty or choose to settle out of court.

But insurance companies created these abuse-specific policies only after the lawsuits of the mid-80s forced them to make large payouts. Until then, general liability policies didn't specifically rule out sex abuse, so churches that needed to pay damages argued that insurers should pay. Thus, even though sex-abuse insurance is available today, many of the big payouts actually come from the churches' general policies, since the abuse happened decades ago. (The Los Angeles settlement probably came out of these general policies.)

According to GuideOne, a major insurer for Protestant churches, most of its clients choose $100,000 of coverage for sex abuse. That might cost a small church with one pastor as little as $100 a year. A much larger church that also runs, say, a day-care center, might pay $6,000 to have $1 million in coverage. Religious organizations buying a lot of coverage may need to prove that they're taking precautions to lower the risk of sex abuse. GuideOne, for instance, requires some churches to conduct criminal background checks on employees, to allow volunteers to work with kids only after they've completed six months of service with the church, and to make sure that no child is ever left alone with just one adult. The policy won't cover everything. Insurers may put a limit on how much they will pay in aggregate, or for each case. (Recently, three major Protestant insurers reported that they receive 260 reports of child abuse every year.)

Partly because of rising insurance costs, a small number of churches are foregoing the coverage. More than half of Catholic dioceses buy their insurance from Catholic Mutual, which operates a self-insurance fund for the Catholic Church in North America. No matter who forks over the money for damages, awards today are so large that some dioceses are facing bankruptcy.