Rector, Wardens and Vestrymen of St. Peter's Church v. American National Fire Insurance Company, 97 Fed.Appx. 374 (3rd Cir. 2004)
Background. A recent case illustrates a number of important points about church insurance. A church was served with a lawsuit and promptly forwarded the papers to its liability insurance company (the "insurer"). The church hired a local law firm several days later so that an answer could be filed to the lawsuit within the 30 days mandated by state law.
The insurer sent the church a "reservation of rights letter" agreeing to provide the church with a legal defense of the lawsuit while reserving the right to deny coverage and discontinue a defense of the case if it turned out that the church's alleged wrongs were not covered under the insurance policy. The insurer's letter also informed the church that the case was being referred to a different law firm than the one the church had retained to file an answer.