INDEMNIFICATION FOR CONGREGATIONS

This memorandum was prepared by Mr. David J. Hardy, senior counsel, in the Office of the Secretary of the ELCA, 8765 West Higgins Road, Chicago, IL 60631.

The 1997 Churchwide Assembly amended the Model Constitution for Congregations by adding a new required Chapter 19 on indemnification consisting of *C19.01. that provides:

Consistent with the provisions of the laws under which this congregation is incorporated, this congregation may adopt provisions providing indemnification for each person who, by reason of the fact that such person is or was a Congregation Council member, officer, employee, agent, or other member of any committee of this congregation, was or is threatened to be made a party to any threatened, pending, or completed civil, criminal, administrative, arbitration, or investigative proceeding.

As here used, the term "indemnification" means compensation or reimbursement provided by the congregation to persons who serve or served in the listed capacities on account of any loss incurred in a proceeding, as defined, that arises out of such service. Other examples of indemnification provisions are those of churchwide organization (ELCA churchwide constitution, Chapter 21) and of the synod's (Constitution for Synods, Chapter 16).

Two extremely important points should be noted about *C19.01. First, this provision does not, by itself, provide indemnification. It only provides that "...this congregation may adopt provisions providing indemnification..." Second, whatever the congregation does must be "[c]onsistent with the provisions of the laws under which this congregation is incorporated." The effect of these two points is that *C19.01. is really nothing more than notice to a congregation that it may, if it wishes, adopt indemnification provisions that are consistent with applicable state law. In short, *C19.01. at most is an advisory, but not implementing, provision.

Why even provide such advice? In many states, a corporation (which presumably is the legal entity used by the congregation under C1.11. and ELCA churchwide constitution provision 9.24.) may only provide indemnification if it does so in accordance with the state law under which it is incorporated.

One of the factors to be taken into account in deciding whether to adopt implementing provisions is the effect of recent federal legislation adopted after the 1997 Churchwide Assembly. The new Volunteer Protection Act (42 USCA Sec. 14501 et seq) generally provides that volunteers will not be personally liable for their acts or omissions if they are acting within the scope of their responsibility for the organization and the harm is not caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights and safety of the individual harmed. Some states have similar statutes.

If a congregation decides to adopt implementing provisions, where should those provisions appear? First of all, check state law. In some states indemnification provisions must be in the articles or amended articles of incorporation. In other states, the provisions may be in the corporate bylaws. Since the congregation's constitution is its corporate bylaws, in these states the provisions could be included in the constitution and numbered beginning with C19.02. In still other states, indemnification rights may exist under the statute, and corporate action is necessary only to deny or limit the scope of indemnification. To continue the analysis even further, in some states, a congregation may be incorporated under more than one state statute; in one particular state, for example, a congregation may be incorporated under any of four separate statutes. In such states, it is necessary to ascertain under which of the several statutes a congregation is incorporated so that the provisions of that particular statute can be determined.

So how does a congregation proceed? First, check with the appropriate synod office. Some synods may have asked the synod's attorney to draft provisions appropriate to the laws of the particular state. If your synod has not done this, a congregation should consult with its own attorney. This is appropriate in view of ELCA polity that each congregation is separately incorporated and owns its own property, provides its maintenance, and conducts its own ministry.

No useful purpose will be served by contacting the attorneys in the Department for Legal Services in the Office of the Secretary. They do not have any information in addition to what is stated above. They are not licensed to practice law in 48 states. They do not have the legal resources (nor the time) to research the state-by-state requirements.