If there is any policy marketed by any insurance carrier to cover risks in a church split, and what the terms and cost might be, we are unaware. However, what typically happens in a church split is that the faction in control of the church, that can retain the corporate entity, usually can retain the insurance policies. That does not automatically mean there is any coverage in a church split, but the insurance that there is will typically go with the corporation. On the other side, the faction that loses control of the corporation or incorporates a new entity to be the secular embodiment of the church typically has stepped completely outside the umbrella of insurance coverage for nearly all types of claims, related to the split or not. (The word “all” is too often overlooked by readers. “All” by definition is ad infinitum bearing of no exception.)

In Newton Covenant Church v Great American Insurance Company, Slip Op. (1st Cir. 2020), the United States Court of Appeals for the First Circuit affirmed the Massachusetts federal trial court that granted the insurance carrier’s motion to dismiss. The Plaintiff was formed by a departing faction. The Plaintiff and some of its leaders or officers were sued by the denomination to dislodge them from the local church property and recover the local church assets. The leaders or officers of the Plaintiff sought a defense under the duty to defend. The duty to defend is in every insurance policy likely to be bought by a church. Under the duty to defend, the defense of a lawsuit against an insured must be paid for by the insurance carrier. However, the insurance carrier denied the claim for a defense. The insurance carrier’s policy named the predecessor local church corporation as the insured and not the faction that departed. Also, the policy expressly excluded lawsuits among insureds. The trial court held the lawsuit by the denomination filed against the departing faction, which had been members of the denomination, was a lawsuit among insureds.

In a split, departing factions that no longer have control of the original church corporation, like any brand-new church, have no insurance until it is purchased. That will generally include everything from employee health benefit programs to auto policies. Any lawsuit with the denomination or faction left in control of the church corporation will generally require out of pocket attorney fees and court costs to defend.

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