DES MOINES, Iowa (ABP) — One of the nation's three largest insurers of congregations has backed away from covering lawsuits filed as a result of church splits and denominational disputes.
Since July, GuideOne Insurance of West Des Moines, Iowa, has been adding the endorsement to new and renewed policies for “directors and officers coverage.” No specific incident triggered the policy change, according to GuideOne general council Tom Farr. “We're just following the developments of the church niche in general,” he said.
But the very public dispute over homosexuality that erupted among Episcopalians last year “got us to thinking,” Farr said. “We had read about disputes among others over property,” he added.
Insurance is designed to protect the insured against “unforeseen and accidental events,” he said, but a church split or disaffiliation is “clearly not accidental … not like somebody running a red light. That's an internal matter and not either unforeseen or an accident,” he added.
Most churches and religious organizations carry two types of policies – general and directors/officers coverage. General policies usually include property, bodily injury and personal injury coverage. Directors-and-officers coverage typically is broad and covers claims against wrongful acts or issues created by wrongful actions. “It's financial injury coverage,” he said.
Conflict between two factions in a church or other religious organization often splits the body, leading to a fight over property and assets, Farr said.
The decision to exclude those risks “is purely a financial act,” he said. GuideOne should not have to pay legal expenses for both sides in a lawsuit that erupts from internal disagreement. “We felt that our policy didn't cover it anyway, but we decided to clarify” that stance, the attorney said.
The other two primary insurers, Church Mutual of Merrill, Wisc., and Brotherhood Mutual of Fort Wayne, Ind., apparently have made no changes.
Brotherhood Mutual's policy already has a limitation in place, and the firm does not plan to broaden it, explained Mitzi Thomas, assistant vice president of corporate communications.
Neither Church Mutual's legal council Charles Kirby nor corporate communications director Jay Lillge would discuss whether the firm is considering a similar endorsement or other limitations. A few Church Mutual policyholders indicated they had seen no changes and had not heard about any pending changes from company representatives.
“It's unfortunate but something a congregation has to consider,” Farr said. “There is a business side [to] running a church. [Schism can become like] a squabble between business partners.”
GuideOne's endorsement will be applied to regional and national religious bodies as well. Denominations that are more centrally controlled generally and individual churches and groups with provisions for splits in their governing documents or property deeds are not as much at risk, he said.
Brotherhood Mutual's current directors-and-officers policy provides $15,000 to cover the legal costs of a declaratory judgment of ownership. The policy contains a provision that requires the parties to solve the issue, and then the insurance company will determine which party benefits from the policy's coverage.
“We will not pay both sides,” Thomas said. “We don't want to be caught up in the problem. We don't feel like we need to deny coverage [with a provision such as GuideOne's]. We just don't want to be caught in the middle.”
-30-