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 Ohio Supreme Court ruled that an exclusion in a church's insurance policy for criminal or intentional acts precluded coverage not only for the person committing the wrongful act, but also for the church, even though it was being sued for negligence. In May 2006, a married couple (the "plaintiffs") dropped off their 2-year-old son at a church-operated preschool. When the plaintiffs picked up their son that afternoon they noticed bright red marks and abrasions on the boy's rear end, back, and upper thigh areas. The child complained of pain and stated that a teacher had beaten him with a knife. The plaintiffs contacted the church to report the injuries and to request disciplinary action against the teacher. The church responded by sending them a letter, through its headmaster, informing them not to bring their son back to the preschool under threat of trespass charges.