• Key point. Insurance policies are construed in favor of the insured, and exclusions are narrowly interpreted.

• Key point. An insurer may have a duty to provide a legal defense for a minister who is accused of misappropriating funds from an elderly member, although there may be no duty to pay any portion of judgment or verdict rendered against the minister.

An Alabama court ruled that a church’s “directors and officers” insurance policy covered a lawsuit brought against a pastor for improperly obtaining money from an elderly member. The daughter of an elderly church member was appointed guardian of her mother’s property. The daughter sued the minister of her mother’s church, claiming that he improperly obtained funds from her mother by means of conversion, fraud, and undue influence. The minister notified the church’s “directors and officers” insurer of the lawsuit and asked the insurer to provide him with a legal defense. The insurer asked a court to determine whether or not the minister’s actions were covered under the insurance policy. The court concluded that the insurer had a legal duty to provide the minister with a defense of the lawsuit. It noted that (1) “an insurance company’s duty to defend its insured is determined by the language of the insurance policy and by the allegations in the complaint about what gave rise to the cause of action against the insured”; (2) the insurance contract is “construed liberally in favor of the insured and strictly against the insurer”; and (3) “exclusions are to be interpreted as narrowly as possible, so as to provide maximum coverage for the insured, and are to be construed most strongly against the insurance company that drafted and issued the policy.” The court noted that the church’s insurance policy provided coverage for officers and directors (including the minister in this case) in any lawsuit brought against them by reason of alleged dishonesty on their part unless a court determined that the officer or director acted with deliberate dishonesty. Since the minister had not yet been found guilty of “deliberate dishonesty,” he was covered under the insurance policy. The court acknowledged that if the minister was found to have acted with deliberate dishonesty in the daughter’s lawsuit, the insurer would have no duty to pay any portion of the judgment or verdict. Graham v. Preferred Abstainers Insurance Company, 689 So.2d 188 (Ala. App. 1997). [ Personal Liability of Church Officers, Directors, and Trustees]

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