Stephens v. Conyers Apostolic Church, 2000 WL 306767 (Ga. App. 2000)

Background. Are church-owned vehicles automatically covered under a church’s liability insurance policy? Many church leaders assume that the answer to this question is “yes.” A recent case demonstrates that this may be a dangerous assumption that may expose a church to a potentially substantial uninsured loss.

A recent case. For a number of years a church owned a van that was insured under the church’s insurance policy, which carried a $500,000 liability limit. The church board authorized the pastor to purchase a new van to be titled in the name of the church. This van was to replace the pastor’s personal vehicle. The pastor informed his insurance agent that the new van was a replacement for his personal vehicle. However, the pastor instructed his insurance agent to insure the van under his personal auto insurance policy rather than the church’s policy. The pastor’s personal policy carried a liability limit of $50,000. The church’s policy never listed the van as an insured vehicle.

A woman (the “victim”) was injured when her car was struck by the van while it was being driven by the pastor’s wife. The victim sued the church and the pastor’s wife, and a jury awarded her $425,000 in damages. She attempted to collect on the church’s $500,000 insurance policy, but the church objected on the ground that the van was not covered under the policy. The church claimed that the pastor’s $50,000 insurance policy was the only amount of insurance coverage that applied.

A trial court agreed with the pastor on the basis of the following three conclusions:

(1) the pastor had an “insurable interest” in the van, even though title was placed in the church’s name, and so it was permissible for him to insure the van under his personal auto policy

(2) the pastor instructed his insurance agent to insure the vehicle under his personal auto policy

(3) the church failed to notify the church insurance company to add the van to the church’s policy

The victim appealed, and a state appeals court affirmed the trial court’s ruling in favor of the church. The court concluded that “no legal interest in the insured vehicle as property is necessary to support an insurable interest regarding liability insurance. As the church agent with primary custody of the vehicle [the pastor] had a sufficient insurable interest in the vehicle through his potential legal liability to authorize his decision to insure the vehicle under his personal liability policy, notwithstanding his lack of ownership.”

The court also agreed with the trial court’s conclusion that the pastor “did not properly or timely notify the agent to change the church’s insurance to extend coverage to the van.”

On appeal, the victim claimed that the trial court erred in failing to find coverage under the church policy because the new van clearly fit within the policy’s definition of a “newly acquired vehicle.” The court disagreed, noting that “in order for this policy provision to apply, the insurer must be notified within 30 days of delivery to the insured of the newly acquired vehicle. The evidence is undisputed that the insurer did not know that the church was the title holder of the van until this accident, which occurred almost two months after delivery. Consequently, the circumstances show the failure of one of the contractual criteria. The trial court correctly concluded the church policy did not afford coverage of its own force.”

Relevance to church treasurers. What is the relevance of this ruling? Most importantly, it demonstrates that vehicles may not be covered under a church’s liability insurance policy even if titled in the name of the church, if the church fails to notify the insurance company of the new vehicle in the manner prescribed by the insurance policy.

The lesson is clear—prior to purchasing or leasing any vehicle, church leaders should review the church insurance policy to be sure that all preconditions to insurance coverage will be satisfied as of the time that title is acquired. This is a very simple but important procedure. A failure to comply with the policy’s requirements may expose the church to an uninsured loss as a result of an accident involving a church-owned vehicle. If in doubt regarding coverage, church leaders should speak with the church insurance agent or company.

This case also demonstrates that church leaders should not assume that new vehicles are automatically insured because the church’s insurance policy contains a “newly acquired vehicle” provision. In some cases, such a provision is triggered only after the church provides proper notice, which the church failed to do in this case.

This article originally appeared in Church Treasurer Alert, June 2000.