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.
* A Michigan court ruled that a church insurance policy’s "counseling endorsement" provided coverage for a lawsuit brought by a husband and wife against their pastor and church for injuries they allegedly suffered as a result of the pastor’s counseling of the wife, even though the pastor later engaged in a sexual relationship with the wife that was excluded from coverage under the insurance policy. A woman ("Penny") requested pastoral counseling from her pastor. At her one and only appointment with the pastor she discussed three issues including a disagreement with her mother- in-law, the fact that her husband did not take her side in that disagreement, and the mutual resentment between herself and her husband because she attended church and wanted him to attend also, but he wanted her to be home with him on Sunday mornings. The pastor’s advice to her was that neither her husband nor mother-in-law were Christians, so unless they asked for her forgiveness first, she had no obligation to forgive them. Even though there were no more formal appointments with the pastor, he continued to ask, both at church and when visiting her home, how she was doing. The pastor also encouraged Penny to get more involved at the church. Penny became involved in at least four different programs at the church and her priorities shifted so that church was first, her children second, and her husband was not much of a priority.
Six months after the initial advice was given by the pastor, Penny began to work in the church office where she filled in while the regular secretary was in the hospital. After Penny began to work at the church, the pastor initiated a sexual relationship with her that continued for two years with some, but not all, of their encounters being consensual.
Penny and her husband later sued the pastor and church for injuries the suffered as a result of the pastor’s counseling advice prior to the time that he engaged in sexual relations with Penny. The church’s liability insurer declined coverage because it believed that the conduct complained of was excluded under a provision in the policy denying coverage as a result of actual or alleged conduct of a sexual nature. Penny and her husband claimed that the insurance policy had a "counseling professional liability endorsement" that clearly provided coverage. The insurer asserted that the counseling endorsement did not apply because the activities consisted of the pastor’s spiritual advice and thus did not fall within the meaning of "counseling activities."
The court ruled that the counseling professional liability endorsement did provide coverage for the pastor’s counseling activities prior to the time he engaged in sexual relations with Penny. It noted that the term "counseling activities" was not defined in the contract, and concluded that "the term ‘counseling activities’ can reasonably be understood in different ways and, therefore, it is ambiguous. Accordingly, the policy will be construed against the insurer and in favor of coverage …. Because this question is solely a question regarding the duty to defend which can be determined by reviewing the underlying allegations and the insurance policy, this case does not require us to examine the substance of the pastor’s advice."
The court also rejected the insurer’s argument that the theory of "dual causation" prevented coverage under the church’s insurance policy. Under this theory, if an injury results from two or more causes, and one of the causes is insured but one or more causes are not, then the insurance policy may not provide coverage. The court rejected this argument, noting that the dual causation doctrine is not applicable in cases such as this where either the pastoral counseling or the pastoral sexual misconduct is independently capable of producing the alleged injuries to the parties and their marriage.
Application. This case illustrates two important points. First, some church insurance policies exclude coverage for injuries resulting from sexual misconduct. This is a serious omission that exposes a church to an uninsured risk of potentially significant proportion. Church leaders should review their church insurance policy to see if they have coverage for this risk. If such coverage does not exist, discuss coverage options with your insurer. Second, the fact that a policy excludes sexual misconduct does not prevent coverage for injuries allegedly resulting from counseling activities prior to the commencement of a sexual relationship. Ritzema v. Bailey Church of Christ, 2001 WL 736570 (Mich. App. 2001).
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