• Key point. Church insurance policies may not provide coverage for clergy or laypersons who engage in sexual misconduct
A federal appeals court ruled that a church insurance policy did not provide for a legal defense of a minister who engaged in sexual relations with two members of his congregation. The minister served a congregation in Missouri from 1986 to 1994. Two women sued the minister, claiming that he engaged in sexual misconduct with them over a span of years. The women alleged that the minister used his position as a minister and pastoral counselor to induce them into having sexual relations with him. They asserted that such behavior violated a "fiduciary duty" he owed them, and caused them emotional distress. The minister sued the church's insurance company after it refused to pay for his legal defense.
The church's comprehensive general liability policy provides for the following coverage:
The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of personal injury or property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such personal injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent ….
"Insured" is defined in the policy as "any person or organization named as an insured, also the following additional insureds … any clergyman, employee, vestryman, warden, member of the board of governors, executive officer, director or trustee of the organization while acting within the scope of his duties as such."