Gardner Taylor likes to tell the story of the little town that for many years had no lawyers. A young lawyer came along, opened a practice there, but struggled to make a living. Just as he was about to give up and move to a bigger town, a second lawyer opened an office across the street—and both of them became rich.

Churches face an increasingly litigious and regulated environment. Over the past five years, church litigation has dramatically increased, according to the annual church litigation survey conducted by my Church Law & Tax Reportnewsletter.

For many years, only 1 percent of churches reported being sued during the previous year. This number jumped to 2 percent in 1997 and 1998, and to 3 percent in 1999.

Larger churches face even higher risk of litigation. In 1999, 7 percent of churches having attendance of 1,000 or more at their principal weekly worship service were sued. This increase in church litigation far surpasses the relatively modest increases in litigation for the ...