Insurance

Key point 10-16.7. A liability insurance policy provides a church with a legal defense to lawsuits claiming that the church is responsible for an injury, and it will pay any adverse settlement or judgment up to the limit specified in the policy. Liability insurance policies exclude a number of claims. For example, some policies exclude injuries based on criminal or intentional acts and claims for punitive damages. A church has an obligation to promptly notify its insurer of any potential claim, and to cooperate with the insurer in its investigation of claims.

Negligence as a Basis for Liability

* The Ohio Supreme Court ruled that a church’s liability insurance policy covered allegations that the church was responsible, on the basis of negligence, for the sexual misconduct of a church employee. An adult male claimed that he contracted the human immunodeficiency virus ("HIV") after having been sexually molested by a church employee. He sued the church, claiming that it was legally responsible for his condition on the basis of negligent hiring and supervision. The church’s insurance company claimed that there was no coverage under the church’s insurance policy for such a claim since the coverage of intentional or criminal acts, including sexual molestation, are not covered. The supreme court disagreed, and ruled that the negligence claims against the church were covered by the church’s insurance policy. The court began its opinion by noting that it is "well-settled from the standpoint of public policy that the act of intentionally inflicting an injury cannot be covered by insurance in protecting the person who inflicts such injury." As a result, one generally cannot obtain insurance to protect against his or her own intentional or criminal acts. However, the court noted that the "societal condemnation that animates the public policy forbidding insurance for the intentional tort of sexual molestation does not exist for the tort of negligence." And, since the claims against the church were all based on negligence rather than intentional or criminal conduct, there was no basis for denying insurance coverage. "This is so," the court concluded, "because the intentions of the molester are immaterial to determining whether the allegedly negligent party has coverage." It observed that a contrary ruling would "transform" negligence into intentional actions "for the purposes of deciding negligent hiring cases involving sexual abuse. Such a decision effectively dissolves the distinction between intentional and negligent conduct, allowing the intentional act to devour the negligent act for the purpose of determining coverage." Certainly, "society does not want to encourage or indemnify the wrongful conduct of the molester, but precluding coverage for a negligent party would not further this goal. Instead, precluding coverage would risk preventing the victim from obtaining a fair and adequate recovery, in contravention of the purpose of modern tort law."

Application. Most church insurance policies exclude intentional or criminal acts from coverage. It is important for church leaders to understand if this exclusion applies to lawsuits brought against their church by victims of sexual misconduct. After all, acts of sexual misconduct clearly would appear to be excluded under the liability policy. While this may be true, the fact remains that the church is not being sued for intentional or criminal acts. It did not molest the victim. It most likely will be sued on account of its negligence in selecting or supervising the offender. As this case illustrates, such claims should be covered under most church insurance policies. Doe v. Shaffer, 738 N.E.2d 1243 (Ohio 2000).

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