• 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.”

The policy also provides additional coverage for pastoral counseling liability under a provision defining “personal injury” to include “acts, errors or omissions of ordained clergy, acting within the scope of their duties as employees of the named insured and arising out of the pastoral counseling activities of these individuals.”

A federal district court concluded that the minister was not an insured under the policy because the allegations in the underlying action involved acts committed outside the scope of his employment. The minister appealed, arguing that he was entitled to a defense under the policy since the women’s allegations arose out of his duties as a pastoral counselor. He pointed out that allegations of sexual contact that arise from such counseling are not unforeseeable and are therefore covered by the pastoral counseling liability provision. A federal appeals court disagreed, and ruled that the church’s insurance policy did not cover the minister’s actions. It observed:

In this case, the policy provides coverage for “acts, errors or omissions of ordained clergy, acting within the scope of their duties as employees of the named insured and arising out of the pastoral counseling activities of these individuals.” Thus, to determine whether [the minister] is an insured under the policy, we must find not only that the allegations arise out of pastoral counseling but that [he] was also acting within his duties as an employee of the [church] when he engaged in the sexual misconduct alleged in the complaint. If we were to accept [his] interpretation of the pastoral counseling liability provision, that we need only determine whether the allegations arise out of pastoral counseling, the clause “acting within the scope of their duties as employees of the named insured” would be rendered meaningless. On the other hand, construing the pastoral counseling liability provision to require the determination of whether [he] was acting within the scope of his duties when he allegedly engaged in sexual misconduct with the plaintiffs in the underlying action gives the provision meaning.

The critical question, the court concluded, was whether or not the minister was acting within the scope of his employment when he engaged in sexual relations with the two women. The court concluded that “in applying the tests for agency/respondeat superior liability, the Missouri courts have held that a priest does not act in furtherance of the business or interests of his employer when he engages in sexual misconduct with parishioners.” Further, the court noted that Missouri courts have ruled that “sexual relations arising out of a counseling relationship do not fall with the scope and course of the counselor’s employment,” and so the minister’s “alleged sexual misconduct falls neither within the scope of his duties as a priest nor as a pastoral counselor.” As a result, the minister was not entitled to a defense under the policy “as the alleged acts of sexual misconduct do not fall within the scope of his employment.”

Application. This case addresses an important concern. Unfortunately, a number of clergy and lay workers have engaged in sexual contact with adults and minors. In some cases, the “victim” will sue the offender, as well as the church. Offenders usually assume that the church’s insurance company will provide them with a legal defense, and pay any portion of a judgment or settlement attributable to their misconduct. This case demonstrates that this assumption will not always be true, and that persons who engage in sexual misconduct may be responsible for retaining and compensating their own attorney and paying a judgment or settlement. Newyear v. The Church Insurance Company,1998 WL 640914 (8th Cir. 1998). Seduction of Counselees and Church Members

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