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It might be one of the more astringent ironies in the decades-old tension between scientific education and religious faith in the United States. Not on the level of the Scopes monkey trial, perhaps, but worth noting nevertheless.

The irony is that the scientific rigors of a vibrant risk management program are playing a leading role in the intense and difficult battle to restore a sense of professional responsibility to Roman Catholic dioceses and other faith-based nonprofits.

However, risk management programs that have been developing over the last two decades are showing promise, as churches and other nonprofits are using them to do a better job of screening potential offenders and reporting suspicious incidents.

Rick Dangel, the president and CEO of Arlington, Texas-based Praesidium Inc., which has developed science-based programs to help managers in the nonprofit sector screen potential offenders, says Episcopal dioceses, the Presbyterian Church of the USA and the Rabbinical Council of America are using his program, in addition to the Roman Catholic Church.

"This is not a faith-based problem, it's a psychological problem," Dangel says.

Dangel, a child psychologist, formed his company 20 years ago when fellow members on a YMCA board asked him if there was a test that could screen for potential child molesters. The discussion came during board reaction to the fact that a volunteer at Dangel's YMCA was found to have molested a young person who was a member there.

At the time, Dangel says he looked around and found very little evidence of science-based research or programs that nonprofit risk managers could use to protect their vulnerable populations.

What he and some associates came up with after a root-cause analysis of thousands of abuse cases was a scientific method that nonprofits can use to lower the risk of having a volunteer or an employee break the law.

Key pieces of the method involve the use of background checks, reference checks, screening, selection, monitoring and supervision processes, and providing employees with numerous reporting options if they suspect someone of acting inappropriately.

"We like to see that organizations have policies that define the bandwidth of acceptable behavior," Dangel says.

Dangel says nonprofits are still loathe to think about misconduct with minors as a risk in their organization, but that many more than there used to be are getting on board with the concept. "The entry point now is definitely better than it was 10 years ago, the level of awareness is better," says Dangel.

In addition to Praesidium's programs, the National Catholic Risk Retention Group Inc., which has as shareholders more than 60 Catholic dioceses, owns its own risk management program, Virtus, which is operated by the Tulsa, Okla.-based risk management service provider, the Agos Group.

(For more on the methods that Virtus and Praesidium encourage and practice, please see the story titled "Fairly Focused" online.)

Churches and other nonprofits are also much more involved in getting appropriate information on losses and exposures to insurers, according to Peter Persuitti, a Chicago-based managing director with Arthur J. Gallagher & Co.'s religious and nonprofit practice group.

"We are now seeing the exposure, analysis, oversight and mitigation residing in the leadership of the church. The human resources executive, more importantly, the chancellor and vicar general are so serious about wanting to take on the accountability," Persuitti says.

With the issue of molestation having been broadly breached in the Roman Catholic Church and elsewhere, what has also been revealed is that there is a unique risk management capability that some in the church possess, and it stems from the very poverty that many of the Catholic clergy practice as a bulwark of their faith.

The limited resources of so many dioceses means that the same administrator who handles insurance purchasing and risk management might also oversee such things as human resources and facilities.

Although it gives them a heavy workload, it also gives that employee horizontal access to many of the organization's functions and allows them to implement risk management with a more thorough knowledge of how various departments function.

"I have the challenge of having property and liability and human resources, but, in a way, that makes it a lot simpler," says Ana Jarosz, the director of insurance and employee services for the Diocese of Palm Beach, Fla.

Another risk manager with a diocese says that the risk retention groups and risk management programs that were formed by Catholic churches with the help of psychologists and other consultants are already paying off. And that even with a limited number of carriers in the market they feel like they're getting treated reasonably well.

"If you are focusing on the liability issue, I think we are being very fairly treated by the underwriters," says Monica Adams, the risk manager for the Diocese of Kansas City.

Adams says much greater transparency on the part of Roman Catholic churches in the way that they are disseminating information about their risk management programs is helping.

"The diocese are putting so much more out on the Web site so people understand how our programs are set up and how we are protecting our children," Adams says. And of the heavy lifting she, Jarosz and others undertake in overseeing all of those job functions?

"It's a mission," says the Kansas City Diocese's Adams.

Although risk management programs like Virtus and those offered by Praesidium are considered to be well-researched and popular, Bob Lipps, the San Francisco-based executive director of the Lockton Insurance agency's Lockton Alliance for Ministry Protection program lays out in simple, general language the three steps that nonprofits need to take to lower losses.

In a nutshell, those steps are more careful hiring, instituting more formal policies and procedures developed with the help of professionals, and enforcing those policies.

ACCEPTANCE BY THE MARKETPLACE

While the market is softer now and risk management within the church has improved, few new carriers have entered the market so far, experts say. There are several reasons for this.

One, when the liability insurance market was buffeted by the emergence of long-tailed asbestos claims and other environmental risks back in the 1980s and hardened, risk managers of nonprofits with misconduct liability exposures found themselves banished from the underwriting Garden of Eden along with everyone else.

"In 1986, there was a crisis in liability, and it had nothing to do with sexual misconduct. Lloyd's of London decided to clamp down on us," says Tony Abella, Sr. the Florida-based senior vice president and leader of Arthur J. Gallagher & Co.'s Southeast Religious Practice.

Some relief came in the form of passage in 1986 of the Liability Risk Retention Act giving Roman Catholic churches and others the freedom to form their own risk pools. Thus began the creation of insurance companies either owned exclusively by dioceses or formed to provide services to a specific Catholic diocese.

From that day forward, however, there has still been a limited pool of underwriters who were willing to work with Catholic churches and others, through thick and thin, to help manage their misconduct liability exposure.

Indications are that more underwriters are warming to the idea, even though they haven't entered the market as yet.

"I would say that the openness or the willingness of the underwriters to consider these sexual misconduct risks has increased in the last 12 months," says Dennis O'Hara, a San Francisco-based executive vice president with Arthur J. Gallagher Risk Management Services.

O'Hara's colleague Persuitti says brokers, risk managers and underwriters who have been able to maintain a working relationship during the last decade's withering cycle of class-action allegations, sizable damages and scarcity of coverage are not about to go around looking for new study partners just because the market's soft.

"They all compete with each other, they all know each other. This is not an open market but a highly specialized relationship building long term that requires a committed two-way understanding," says Persuitti.

Lipps echoed the point that very few new players are entering the religious and nonprofit insurance market. He says even though the openness of religious groups and their ability to forestall abuse has changed, the number of companies willing to underwrite that risk has not.

Among nondirect writers Lipps mentions those that are active in the field are the Philadelphia Insurance Companies, the Riverport Insurance Company and the Great American Insurance Group.

"It is not an emerging market," says Lipps. "There is no more viability to the marketplace today than there was before."

Even when new carriers have stuck their chins out and tried to come out with pricing for sexual misconduct liability coverage, they have missed the mark substantially, according to a risk manager with eight years of experience with a large Catholic diocese.

Wayne Sandy, a Texas-based risk manager who at the end of 2007 left the Diocese of Dallas to step out on his own as a nonprofit risk management consultant, says writing policies for this kind of risk without having much of a track record with it is difficult.

"You didn't see a lot of new policies being written last year," says Sandy. "Last year, companies started talking like they wanted to, but the new ones or fairly new ones didn't have enough loss experience."

Sandy says that when prospective new underwriters did come out with offers of coverage, the pricing just wasn't competitive. Nor are carriers offering much different in the way of coverage, even if they already have a relationship with the insured and the market is softer, says Gallagher's Abella.

"In general, all markets provide a limited amount of retro dates and exclude coverage for any claims where there is evidence of prior knowledge on the part of the administration," Abella says.

But that doesn't mean that diocesan or other religious or nonprofit risk managers should stop trying to sell themselves to carriers, whether they are new to them or the market.

Sandy says it doesn't hurt to present your loss history and exposures to new carriers with the short-term goal of better acquainting them with your risk, and the long-term goal that they may one day be able to provide you with competitive pricing.

"You need to let them get comfortable with you and who you are," says Sandy.

After all, the market should continue to soften and the numerous risk management programs being perfected by Catholic dioceses and others should, in theory, continue do a better job of screening for potential abusers lowering the liability risk profiles of the dioceses.

The Lisle, Ill.-based National Catholic Risk Retention Group, which counts as shareholders 66 dioceses throughout the United States, and the Catholic Mutual Group, a nonprofit insurance provider based in Omaha, Neb., which provides services to 124 dioceses nationwide, declined to comment for this story.

DAN REYNOLDS is senior editor of Risk & Insurance®.

April 1, 2008

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