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.
The Supreme Court of South Dakota ruled that a church's lawsuit seeking monetary damages against a contractor whose negligence in completing a remodeling project allegedly caused significant water infiltration had to be dismissed since it was filed after the deadline specified by the statute of limitations. In 2002 a church contracted with a company ("contractor") for construction of a new addition and renovation of its existing structure. The contractor hired subcontractors to perform much of the work. The project was completed in 2003, and almost immediately the church experienced a variety of problems throughout the structure, including ice dams, bats in the church, chipping concrete, hail penetration, and drainage issues. But the overriding problem was water infiltration "throughout the structure." The water infiltration persisted and resulted in the church filing a lawsuit in 2010 against the contractor and subcontractors ("defendants"). The defendants asked the court to dismiss the lawsuit on the ground that it was filed after the six-year deadline imposed by the statute of limitations.