• Key point. Many churches insure their property for less than its market or replacement value. In the event of a total loss through fire or other catastrophe, the church faces an unexpected and often substantial uninsured loss. In some cases, the church may have a legal claim against its insurance broker for the uninsured amount if the broker breached a contract to provide the church with adequate insurance coverage. The insurance company itself may also be liable for the broker's acts.
A Virginia court ruled that a church that was destroyed by fire and that was insured for only one-third of the value of the property could sue its broker and insurance company for the balance. For many years, a church purchased insurance from the Aetna insurance company through a local insurance broker. These policies provided coverage for any fire loss to the church building. The church's insurance broker set the coverage limits on the church's policies each year. The church's pastor claimed that he was assured by the broker that adequate insurance coverage was being provided under the Aetna policy. For the policy period between February 15, 1987 and February 15, 1988, the broker obtained an Aetna policy with a $100,000 property coverage liability limit. The coverage amount increased gradually between $2,000 and $4,000 each year, until the broker obtained an Aetna policy with a $132,000 property coverage liability limit for the policy period between February 15, 1996 and February 15, 1997. The 1996-1997 policy premium increased approximately 46% over the 1995-1996 rates.