Business Interruption Claims for Faith-Based Organizations: Who Refills the Empty Collection Plates?

By: Tucker H. Byrd, Esq., Byrd Campbell, P.A.

While politicians and business pundits debate about ways to salvage the economy with stimulus packages and the phased reopening of society, the pandemic has had a silent but devastating toll on faith-based organizations which have suffered a staggering decline in financial support. Even the most ardent believers, living with the fear of losing their jobs, find it hard to support their favorite faith-based organization to the same degree. The CARES Act has provided some support for faith-based organizations allowing them to apply for loans and increasing charitable deductions, but those fall short of making up for the vacant pews and empty collection plates.

So where can churches, synagogues, fellowships, and other faith-based organizations look for support? One place to start is the faith-based organization’s insurance policy. Yes, many organizations have insurance which purports to protect for loss of income. Whether to compensate for fires, tornados, or other catastrophic losses, their insurance policies may provide the answer to financial recovery. The question remains, of course, how the insurance carriers will react to a claim made for the COVID pandemic. The insurance industry has not been shy in drawing battle lines to avoid paying for COVID claims, and faith-based organizations should not expect to be spared the rough treatment.

It may seem incongruous to think of a church and loss of income, but churches typically garner “income” from a variety of sources. Member contributions, school tuitions, premises rentals (e.g., weddings, funerals, etc.), book sales, and charitable events generate the money which allows the institution to operate. Focus not on whether the “income” is taxable. Regardless how money is treated for tax purposes after it “comes in,” it is still “income,” and the loss of it might be insurable. Besides, if the insurance company sold the church a policy which insures against loss of “income,” then a fortiori, there must have been income, the loss of which needs to be insured.

The love of money may be the root of all evil, but money itself likely fuels the outreach efforts. If a church paid for insurance, it has every right to expect to receive the benefit of its bargain. Good stewardship by the church’s leadership requires no less.

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