|Conciliation Clauses and Insurance Coverage for Schools and other Christian Ministries
by Gary D. Friesen, Executive VP for Peacemaker MinistriesA burgeoning number of Christian Schools and other Christian ministries include conciliation clauses, (such as the clause suggested by Peacemaker Ministries), in contracts with staff, students and vendors. Conciliation policies are adopted in order to integrate a biblical response to conflict.
These ministries also maintain insurance policies against negligent or wrongful liability that specifically subrogate (or substitute) the insurance carrier for the insured in determining how to defend a legal action. In other words, in most instances the insured ministry cannot, in advance, bind its insurance carrier to a conciliation clause without the carrier’s permission. Therefore, the following factors should be considered when schools and other Christian ministries include conciliation clauses in contracts:
- Generally, a School or ministry can respond to employment disputes without concern for insurance carrier subrogation. Employment related legal disputes, which represent a significant portion of the legal conflicts faced by a school or other ministry, are not covered by general liability policies. In fact, very few insurance carriers offer coverage for employment related disputes.
- Insurance carriers are very receptive to conciliation clauses. Although carriers for non-profit organizations are reluctant to be bound in advance, they are likely to support conciliation on a case-by-case basis because, in their experience, cases submitted to mediation or arbitration result in lower overall cost to the insurance carrier.
- Insurance carriers may agree in advance to be bound to a conciliation clause. The carrier may make such an agreement because they realize the cost benefits, or because the insured agrees to pay an additional fee on the policy. Insurance companies will consider such an alternative if they believe it will be cost effective.
- If the insurance carrier refuses coverage in a specific legal conflict, the ministry may approach the claimant in that case and request that the claimant and ministry enter into an agreement to release each other from the conciliation clause so that each party may benefit from the insurance coverage. The ministry has substantial leverage in this type of situation because most claimants want access to the insurance coverage.
- If the insurance carrier refuses coverage and the insured still desires to pursue conciliation, the insured can invite the carrier to participate in mediation, with the understanding that the settlement is not binding on the carrier. Once the carrier participates in the process and understands the benefits of the settlement, it is far more likely that the carrier will voluntarily extend coverage.