• Key point. Church insurance policies may provide no coverage to clergy and other church staff who engage in sexual misconduct.
A Colorado court ruled that a church insurance policy could not be tapped to pay a judgment rendered against a minister in a sexual misconduct case. A woman sued her former minister and her church on the basis of injuries she suffered as a result of the minister’s sexual misconduct. A jury ruled that the minister was liable for the woman’s injuries and awarded a monetary judgment in her favor. The minister insisted that the judgment against him was covered under a church insurance policy. A trial court disagreed, concluding that the policy clearly excluded any coverage for such acts. A state appeals court agreed with the trial court. The court noted that “if the meaning of the insurance policy is expressed in plain, certain, and readily understandable language, it must be enforced as written.” The church’s insurance policy provides: “The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to any person arising out of sexual misconduct or sexual molestation which occurs during the policy period.” Exclusions to the policy, however, specifically provide that the insurance does not apply “[t]o any person who personally participated in any act of sexual misconduct or sexual molestation.” The minister claimed that by denying coverage to the perpetrator of the sexual misconduct, the exclusion renders any coverage under the policy for sexual misconduct “illusory”. The court disagreed, noting that coverage exists under the policy for the church.
The court also rejected the minister’s claim that the insurance company had “waived” its right to deny coverage by providing a defense to the minister under a “reservation of rights.” Under such a reservation, an insurance company agrees to defend an insured, but reserves the right to deny any obligation to pay an adverse verdict or judgment as a result of an exclusion in the policy. This is a common arrangement, and the court concluded that an insurance company’s decision to provide a legal defense to an insured under a reservation of rights does not amount to a waiver of any exclusions under the policy.
Application. This case illustrates an important principle. While church insurance policies provide coverage for churches that are sued as a result of an incident of sexual misconduct, they often exclude any coverage for the perpetrator. Further, such an exclusion is not affected or “waived” by the fact that the insurance company provides a legal defense for the perpetrator. This exclusion can result in substantial personal liability for perpetrators of sexual misconduct. In some cases insurance companies refuse to provide a legal defense for the perpetrator, meaning that the perpetrator will be responsible for hiring and paying his or her own attorney. Church Mutual Insurance Company v. Klein, 1996 WL 544193 (Colo. App. 1996). [Seduction of Counselees and Church Members, Negligence as a Basis for Liability—Defenses]
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