Key point 10-07.01. Some courts have found churches liable on the basis of negligent retention for the sexual misconduct of ministers and other church workers on the ground that the church was negligent in retaining the offender after receiving credible information indicating that he or she posed a risk of harm to others.
Key point 10-16.07. A liability insurance policy provides a church with a legal defense to lawsuits claiming that the church is responsible for an injury, and it will pay any adverse settlement or judgment up to the limit specified in the policy. Liability insurance policies exclude a number of claims. For example, some policies exclude injuries based on criminal or intentional acts and claims for punitive damages. A church has an obligation to promptly notify its insurer of any potential claim, and to cooperate with the insurer in its investigation of claims.
Key point 10-17.01. Punitive damages are monetary damages awarded by a jury “in addition to compensation for a loss sustained, in order to punish, and make an example of, the wrongdoer.” They are awarded when a person’s conduct is reprehensible and outrageous. Most church insurance policies exclude punitive damages. This means that a jury award of punitive damages represents an uninsured risk.
Key point. Churches that ignore allegations of wrongdoing by a pastor or lay worker face a number of risks in addition to negligent retention. These include (1) liability based on “ratification” of the minister’s actions; (2) punitive damages; and (3) possible personal liability for members of the church board if their conduct is grossly negligent.
A Virginia court ruled that nine victims of childhood sexual abuse could proceed with a lawsuit against the offender’s church and two regional denominational agencies on the basis of negligence and agency.
While it remains to be seen whether actual liability will be found for any of the claims made against the church and the regional denominational offices involved in this case, the mere fact that the Virginia court allowed the claims to proceed is of enormous significance for the following reasons.
“A sustained pattern of predatory abuse”
A church (“Church”), two regional denominational bodies (“Regional Denominational Body A” and “Regional Denominational Body B”; when appropriate here, collectively referenced as the “church defendants”), and a denomination’s national office were sued by several minor victims of sex abuse. The victims had been molested by the same lay youth worker.
The victims’ lawsuit alleged that the Church knew or should have known of the “dangerous propensity” of the perpetrator to sexually assault minor boys prior to hiring him to work with the youth group or his eventual promotion to head of the youth group.
The lawsuit was brought following “a sustained pattern of predatory abuse” by the molester against many different minor boys affiliated with the church’s youth group.
The court declined to dismiss the victims’ claims
The victims’ lawsuit claimed that the church defendants were liable for their injuries on the basis of negligent hiring, negligent retention, gross negligence, and agency. They sought both compensatory and punitive damages.
The church defendants immediately asked the court to dismiss these claims. The claims against the national denominational office were dismissed for lack of personal jurisdiction, a procedural matter in litigation regarding whether a court has jurisdiction over a party named in a suit. However, the court declined to dismiss the claims against the Church and the regional denominational offices for the reasons summarized below.
Negligent hiring, negligent retention, and gross negligence
The court noted that to proceed on a claim of negligent hiring, “the plaintiff must show that an employee’s propensity to cause injury to others was either known or should have been discovered by reasonable investigation.” Similarly, to proceed on a claim of negligent retention, the plaintiffs must show that “both the nature and the gravity of the risk render unreasonable any mitigating response short of termination.”
The victims alleged that:
- Allegations of sexual misconduct by the molester predated his involvement with the Church’s youth group and were known to Church leadership. For example, in or around January 2005, two of the Church’s deacons learned of sexual abuse allegations against the molester.
- The deacons were members of the “Executive Group” of the Church, which holds the power to hire and fire for the Church.
- In 2007, the Church voted in favor of a denominational resolution “On Protecting Children from Abuse,” which identified and aimed to assist churches in preventing sexual abuse of minors.
- The Church knew or should have known of a series of allegations against the molester that preceded his hiring. After his hiring, the Church was aware of a series of allegations against the molester stemming from his time with the youth group.
The plaintiffs argued that these and other allegations demonstrated that the Church knew or should have known of the dangerous propensity of the molester to sexually assault minor boys prior to hiring him to work with the youth group or his eventual hiring as the leader of the youth group. The court noted:
The allegations that dogged [the molester] after being hired should have led [the Church] to know or reasonably investigate to find out about his activities with members of the Youth Group. Indeed, [the pastor and youth pastor] did just that. However [the molester] was retained in his position with the Youth Group, and [the pastor and youth pastor] left the [C]hurch.
Punitive damages for “willful and wanton misconduct”
The court noted that “to justify an award of punitive damages, a litigant . . . must present evidence that the defendant’s acts were so willful or wanton as to evince a conscious disregard of the rights of others, as well as malicious conduct.”
The church defendants insisted “there are no facts alleged showing [the Church] acted with the culpability required for an award of direct punitive damages.”
The court responded:
On the contrary, when [the Church] was confronted with allegations against [the molester] by pastors within the Church, [it] threw its support behind [the molester]. . . . The Church voted to support [the molester], and [the Church] accepted the forthcoming schism in its ministry due to the decision.
The court concluded:
[The Church], aware of allegations against [the molester], retained him, promoted him, supported him, and allowed him to continue in his role as Youth Group leader. This intentional act led to further harm, not just against [the victim] but against the eight other minor boys who are represented in this lawsuit. . . . There are substantial and certain factual allegations that would allow a reasonable [jury] to determine there had been willful and wanton misconduct, as there were substantial and certain allegations that led to a significant portion of [the Church’s] congregation leaving the Church.
Agency
The victims claimed that the regional denominational defendants were liable on the basis of agency for the injuries caused by the molester’s wrongful acts since as a minister he was their agent. Regional Denominational Body A argued that there was no agency relationship between it and the Church. Regional Denominational Body A referred to its organizational documents, and said that, in its opinion, it recognizes the “autonomy of each member church . . . to act on and carry out its own affairs and conduct its own business without interference from [it]. [These statements] make it clear that they were not attempting to establish an agency relationship.”
The court responded:
However, “[w]hether a relationship is characterized as agency in an agreement between parties . . . is not controlling. . . . Labels do not govern the presence of an agency relationship. . . . [T]he power of control . . . is determinative. . . .
Agency relationships are created when two parties consent that one party will act on behalf of another party and subject to the second party’s control. . . . In determining an agency relationship, “[a]ctual control . . . is not the test; it is the right to control which is determinative.”
The victims asserted that the Regional Denominational Body A had the power to “hire, assign, and fire pastors, administrators, and other employees at its local churches.” The victims further stated:
[Regional Denominational Body A] exercised its power and control over its member churches, including [the Church] regularly and routinely. [Its bylaws] also dictate the discipline of member churches, encourage and determine the use [of its campgrounds], and establish Youth Group risk-management teams.
The court concluded that the victims had alleged facts demonstrating that Regional Denominational Body A exercised control over the Church as one of its member churches, and that the Church was responsive to the demands of Regional Denominational Body A.
The victims also argued that an agency relationship existed between the Church and Regional Denominational Body B. Regional Denominational Body B countered by pointing out that its constitution and bylaws “are explicit that individual churches retain autonomy and independence.”
Once again, the court stressed that
labels are not dispositive in determining an agency relationship. . . . Agency relationships are created when two parties consent that one party will act on behalf of another party and subject to the second party’s control. . . . In determining an agency relationship, “[a]ctual control . . . is not the test; it is the right to control which is determinative.”
The Regional Denominational Body B’s constitution and bylaws describe the function of its Executive Board:
[T]he Executive Board shall have entire management of the matters committed to its trust and shall carry out such plans as may seem judicious. . . . [T]he Executive Board shall not have authority to control and direct the agencies, institutions, and shared ministries of the general Association. . . . [I]t is instructed and commissioned to maintain liaison with and study the affairs of these agencies, institutions and shared ministries in search of acceptable solutions to problems which may arise.
The court noted:
[This provision] purports to offer [the Regional Denominational Body B] and its Executive Board only certain, limited powers over member churches. However [the victims] have alleged they have the power and prerogative to address problems with the churches. . . . Indeed, [the Regional Denominational Body B] is alleged to have controlled churches . . . while acting as a ”voluntary organization.” In one example . . . [the Regional Denominational Body B expelled a church] due to violations of [its] rules.
The court pointed out that the Church “chose to participate and cooperate with [the Regional Denominational Body B] instead of maintaining itself as an independent church. . . . [It] also acted on behalf of [the Regional Denominational Body B] by paying the membership dues required of a participating church.”
The court noted that the Regional Denominational Body B had obtained “group exemption” from the Internal Revenue Service (IRS) for all of its churches, including the Church. To qualify for the group exemption, the subordinate organizations must be “subject to the central organization’s general supervision and control.”
The court then stated:
Those subordinate organizations must also provide the central organization with “written authorization . . . [that the subordinate organization] will be subject to [the central organization’s] supervision and control.” During the time period at issue in this case, [the Church] was a subordinate organization to the Regional Denominational Body B [and] remains a subordinate organization. It is reasonable to infer the requisite paperwork granting the power to supervise and control [the Church] was executed in order for [it] to enjoy the group tax exempt status.
The Constitution of [the Regional Denominational Body B] and the tax-exempt status of the churches offers the Executive Board . . . the power to insert itself into the business of local churches. Indeed, it is alleged to have done so in the past. Plaintiffs claim that this power includes the power “to hire, assign, and fire pastors, administrators, and other employees at its local churches and entities.” [Regional Denominational Body B] also has the power to disassociate member churches, as it did in 2012 when it unilaterally dismissed [a church]. Finally, if a church fails to pay its dues for a five-year period, it can be removed from the list of churches on the group IRS exemption for churches submitted by [Regional Denominational Body B]. Discharge of an agent is one of the remedies specifically reserved to a principal.
The court concluded:
[The victims] have alleged facts that would demonstrate an agency relationship between [the Church] and [the Regional Denominational Body B]. Therefore, [they] are entitled to the presumption that actions taken in a specific job-related service for [the Regional Denominational Body B] are made within the scope of the agency relationship. . . . [I]t is premature to cut off the victims’ cause of action against the Regional Denominational Body B.
What this means for churches
This case is important to denominational agencies and to churches affiliated with denominations for the following reasons.
1. The risk of punitive damages and civil suits
Allowing a sex offender to work as a volunteer or employee in a church’s youth or children’s ministry may result in two significant legal risks: punitive damages, and personal liability of church board members.
The court in this case noted that the Church, though aware of numerous allegations of child sexual abuse by the molester, “retained him, promoted him, supported him, and allowed him to continue in his role as Youth Group leader.”
Such behavior, the court concluded, exposed the church to punitive damages because it was “so willful or wanton as to evince a conscious disregard of the rights of others.” This is extremely serious since punitive damages are not covered by a church’s insurance policy, and so the assets of the church (such as its building, vehicles, general fund, and so on) would all be exposed.
The bottom line is that the public will no longer tolerate such behavior. What’s more, the public is outraged by it, and members of the public often express that outrage in the form of their judgments (including punitive damages) as members of juries.
The following common scenarios potentially could result in punitive damages, meaning that the church may face substantial, unbudgeted, and uninsured liability:
- refusing to implement a program for screening youth and children’s workers (both employees and volunteers)
- failure to implement and monitor a policy prohibiting the use of cell phones (for calls and texting) while driving a vehicle on church business
- continuing to use 15-passenger vans
- using cribs in the church nursery that fail to comply with the guidelines mandated by the Consumer Product Safety Commission
In addition to punitive damages, allowing a sex offender to resume normal activities within a church exposes the church and church board members to substantial monetary damages in a civil lawsuit. If the person should ever have sexual contact with a minor on church premises or in the course of church activities, the church would face a jury that would be incredulous to the reality that such a person was allowed to return to the church.
This would be especially true if the person was allowed to have any involvement with children in the church, but it could apply even if the person was not officially involved in youth or children’s programs.
State and federal laws provide limited immunity to uncompensated officers and directors of churches and other charities. This means that they cannot be personally liable for their ordinary negligence. However, such laws contain some exceptions. For example, officers and directors may be personally liable for their gross negligence or their willful or wanton misconduct.
Limited immunity is not ordinarily available to compensated officers and directors of churches and other charities. “Compensation” ordinarily is defined to exclude reimbursement of travel expenses incurred while serving as a director or officer.
Churches that compensate their directors and officers over and above the reimbursement of travel expenses should reconsider such a policy if they are located in a state that grants limited immunity to uncompensated officers and directors. Obviously, these statutes will not protect ministers who receive compensation from their church.
2. Understand the potential scope and limits of agency
The most significant aspect of the court’s opinion was its conclusion that ministers (such as the molester) are agents of their church and its regional denominational offices, and that local churches are “agents” of their parent denomination’s regional offices.
The significance of this ruling is the fact that the claims were allowed to proceed, making it possible for a jury to find two regional denominational offices liable for the acts of a local church. In general, agency makes the principal responsible for the agent’s acts (such as sexual misconduct, negligent driving, and so on) no matter how careful the principal was.
To illustrate, consider a denomination with 25,000 ministers. If the ministers are agents of the denomination’s regional offices, then their wrongful conduct is imputed to the denomination’s regional offices, and no amount of care on the part of the denomination’s regional offices changes that.
Since it would be impossible for the denomination’s regional offices to directly police all 25,000 ministers day to day, it is absolutely liable with no defense. This makes a finding that ministers are agents of a denomination’s regional offices an existential threat jeopardizing the denomination’s very existence. But note four potential defenses available to denominations and their regional offices.
First, the principal is only liable for the actions of agents committed while acting in the scope of the agency. Are sexual misconduct, reckless driving, and other injuries caused by an agent done in the scope of the agency? It is difficult to conceive how this would be the case, since criminal acts of this nature are not considered to be within “the scope of the agency.”
Second, several denominations ordain, commission, or license ministers; require ministerial credentials to be renewed annually; require ministers to pay annual dues; and reserve the authority to discipline or dismiss clergy whose conduct violates standards enumerated in the denomination’s governing documents.
However, the denomination typically has been given no authority to independently monitor or supervise the day-to-day conduct of ministers. The authority of a denomination to ordain, license, or commission ministers requires annual renewals of ministerial credentials, and discipline or dismiss clergy found guilty of specified misconduct is precisely the same authority that is exercised by state professional accrediting organizations (such as state bar associations, medical associations, and boards of accountancy).
Like many religious denominations, a state bar association has the authority to license attorneys, require dues and annual renewals, and discipline or dismiss attorneys for proven misconduct in violation of professional standards.
However, this limited authority does not give the bar association any right to control or supervise the day-to-day activities of attorneys. No state bar association has ever been sued or found liable for the numerous incidents of attorney misconduct and malpractice that occur each year, and no one has ever suggested that attorneys are “agents” of their state bar associations. The US Constitution bars religious organizations from being treated less favorably.
An identical analogy could be made to any professional licensing organization (such as physicians, CPAs, veterinarians, dentists, nurses, and morticians), since they all exercise about the same degree of control: They license and retain the right to discipline or dismiss for violations of a professional code of conduct, but they have no authority to supervise the day-to-day activities of licensees. For this reason, none have been found liable for the malpractice of their licensees and no court has ruled that licensees are “agents” of their professional accrediting organizations.
A federal appeals court recognized this “bar association analogy” in a significant case involving the Assemblies of God denomination. In Alford v. Commissioner, 116 F.3d 334 (8th Cir. 1997), the court observed:
The General Council’s and District Council’s right to control [Rev.] Alford during the relevant years extended primarily to their function in awarding credentials to ministers like himself. Generally, the church has established certain criteria that must be met for an individual such as Alford to obtain credentials initially and to renew that status annually. There are standards for the education a minister must acquire (which he must obtain and pay for himself) and for his performance on certain tests. Other requirements include subscribing to the doctrinal statement of the Assemblies of God, which sets forth the religious beliefs of the church, its ministers, and its members, and to the form of church government. Ordained ministers must preach thirteen times a year, but topics are not decreed by the regional or national organizations. Ministers holding credentials cannot preach in churches other than Assemblies of God churches without permission of the District Council. Ministers may be disciplined for what the church considers failure to follow church doctrine and for lapses in personal conduct, and may, in fact, have their credentials revoked. With some exceptions not relevant here, a minister must tithe to both the regional and national organizations. Attendance at certain meetings is expected, but not required. Thus it is apparent that, while the regional and national churches had doctrinal authority to exercise considerable control over Alford as regards his beliefs and his personal conduct as a minister of the church, they did not have “the right to control the manner and means by which the product [was] accomplished.”
The [trial court] and the United States make much of the fact that Alford, as a minister holding credentials, was “amenable” to the General Council and to the District Council in matters of doctrine and conduct. But this is not unusual in such a profession, and actually is merely a shorthand way of describing the parent church’s doctrinal and disciplinary control discussed above. The control exercised by the regional and national organizations, and their right to control Alford, was no more nor less than most professions require of individuals licensed or otherwise authorized to work in the profession. State bar associations, for example, have certain education requirements and demand a certain level of performance on a bar examination before an individual can be licensed to practice law. On an annual basis, such associations require the payment of dues and often the completion of continuing legal education in order for an attorney to retain his license. State bar associations are empowered to monitor attorneys’ behavior and to discipline them as they see fit, including the revocation of an attorney’s license to practice law (disbarment). Yet no one would suggest that, by virtue of this right to control an attorney’s working life, the bar association is his employer, or even one of his employers (emphasis added).
Other courts have recognized the bar association analogy in cases involving attempts to hold religious denominations liable on the basis of negligent supervision for the misconduct of ordained clergy. To illustrate, a Minnesota appeals court applied the bar association analogy in concluding that a regional and national church were not liable for the sexual misconduct of a pastor since the relationship between the church entities and credentialed clergy (which resembled the relationship between state bar associations and licensed attorneys) was too attenuated to justify the imposition of liability on the church entities for clergy misconduct. C.B. ex rel. L.B. v. Lutheran Church in America, 726 N.W.2d 127 (Minn. App. 2007).
The court drew an analogy to the relationship between attorneys and the state supreme court. In Minnesota, the supreme court “through the Rules of Professional Conduct, sets forth the rules and standards by which lawyers must adhere. If these rules are violated, the court may discipline the responsible attorney. But this relationship between the supreme court and the disciplined attorney is not an employment relationship. There has to be something more.” Similarly, the regional and national churches in this case had “limited control over the pastor.” But, “the congregation, not the umbrella entity, has the responsibility for hiring and firing the pastor, setting forth the terms and conditions of employment, supplying the pastor with parsonage, vacation and supplies, and paying the pastor. [It] is the congregation, not the [regional or national churches], which employs the minister.”
Third, judicial recognition of a duty on the part of a denomination to supervise the activities of affiliated clergy and churches, where no such authority exists, would violate the First Amendment religion clauses since it would amount to governmental manipulation of the polity of a sovereign religious organization.
The essential question in this case is: Can a civil court, consistently with the First Amendment’s establishment and free exercise of religion clauses, impose a duty on a denomination to supervise and control affiliated churches and clergy when the theology, history, practice, and organizational documents of the denomination forbid such control? Stated simply: Can a court compel a religious denomination to alter its polity? Obviously, the answer is no.
The United States Supreme Court has often stated that the civil courts may not affect ecclesiastical doctrine or polity. For summaries of five US Supreme Court rulings showing that civil courts may not affect ecclesiastical doctrine or polity, see the “Defenses of Liability” section in the Legal Library.
The implication of US Supreme Courts precedents I’ve linked to above is unequivocal: Government action that seeks to manipulate or distort the internal organization and government of a religious denomination violates the constitutional guarantee of free exercise of religion.
A civil court is therefore without power to impose a duty of supervision and control upon a religious denomination over its affiliated entities contrary to the doctrine, history, and organizational documents of the denomination in order to redress injuries allegedly caused by the activities of a minister or church.
Some “hierarchical” denominations do exercise sufficient control over clergy and churches to create an agency relationship. For an example, see the second case study in “The Requirement of Employee Status” section of the Legal Library.
3. Definition of agency
Section 1.01 of the Restatement of Agency 3d specifies that “agency is the fiduciary relationship that arises when one person (a principal) manifests assent to another person (an agent) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consent to so act.” It can be argued that in many denominations ministers are not agents under this definition since they are not “subject to the principal’s control.” In many denominations, ministers remain free of any control by their denomination in virtually every aspect of their lives and ministry. To illustrate, ministers:
- Compose and deliver sermons (their quintessential duty) and perform all of their pastoral responsibilities (i.e., counseling, hospital visitations, managing staff, conducting board meetings) free from any “control” by the denomination.
- Perform sacerdotal functions (i.e., baptisms, weddings, communion) free from any “control” by the denomination.
- Choose their place of employment.
- Along with the governing board of their church, enter into loans, purchase and sell property, admit and expel members, hire employees, and initiate and pursue church construction projects without any involvement, approval, or control by the denomination.
In many denominations, it is difficult to identify a single aspect of a minister’s life and ministry that is subject to the “control” of his or her denomination. Indeed, how could it be otherwise with a population of thousands of ministers.
Meaningful control would require thousands of “inspectors” or “religious police” to monitor ministers continuously. Such a prospect would be intolerable to any denomination and its ministers. This is a far cry from the relationship contemplated by the Restatement of Agency.
4. Group exemptions and denominational liability
The court referenced group exemption rulings in support of its decision. Regional Denominational Body A had obtained a group exemption ruling from the IRS in the past that covered its affiliated churches including the Church.
Group exemptions are an administrative convenience for both the IRS and organizations with many affiliated organizations. Subordinates in a group exemption do not have to file, and the IRS does not have to process, separate applications for exemption. Consequently, subordinates do not receive individual exemption letters.
Exempt organizations that have, or plan to have, related organizations that are very similar to each other may apply for a group exemption. Groups of organizations with group exemption letters have a “head” or main organization, referred to as a central organization.
The central organization generally supervises or controls many affiliates, called subordinate organizations. The subordinate organizations typically have similar structures, purposes, and activities. To qualify for a group exemption, the central organization and its subordinates must have a defined relationship. Subordinates must be:
- affiliated with the central organization;
- subject to the central organization’s general supervision or control; and
- exempt under the same paragraph of IRC 501(c), though not necessarily the paragraph under which the central organization is exempt.
Several lawsuits brought against denominational agencies for the liabilities and obligations of affiliated churches have cited their group exemption as evidence of sufficient control to support liability. After all, a group exemption ruling requires that the central organization have general supervision or control over its subordinate units (i.e., affiliated churches).
Although not addressed by the court, any attempt to use a group exemption ruling as evidence of denominational liability for the obligations of affiliated churches faces formidable obstacles, including the following:
- No court has found a denominational agency liable on the basis of a group exemption ruling for the acts or obligations of affiliated churches.
- In only one reported case was a group exemption ruling cited as evidence in support of a denomination’s liability for the conduct of an affiliated church covered by its group exemption. Kersh v. The General Council of the Assemblies of God, 804 F.2d 546 (9th Cir. 1986).
In this case a federal appeals court upheld a district court’s summary judgment in favor of the national Assemblies of God church (the General Council of the Assemblies of God) in a case claiming that the national church was legally responsible for the alleged securities fraud of an affiliated church.
In addition, some state trial courts have dismissed denominational agencies as defendants from civil lawsuits and rejected plaintiffs’ claims that they were liable on the basis of a group exemption ruling.
J.W.C. v. Church, 2021 Va. Cir. LEXIS 148 (Va. App. 2021).
