Category: Uncategorized

CHURCHES AND THE INSURANCE INDUSTRY

While for property and casualty (think auto, personal injury, etc.) insurance coverage specialty companies have arisen that sell coverage to churches, in the health insurance arena there has not yet arisen a company willing to tailor coverage to a church, at least not in all states.  Believing that the reluctance of companies to offer tailored coverage (excluding abortion or other procedures) came solely from regulatory pressure, in Skyline Wesleyan Church v California Department of Managed Health Care, Order on Cross Motions for Summary Judgment, (SD Ca., 2018), the church sued the regulatory agency to force a change in policy.  Unfortunately, the regulator had never refused to approve a tailored insurance policy and none were ever offered to it to consider.  The church was unable to prove that there was behind the scenes a conspiracy or unwritten regulatory pronouncement in place.  Because the church could not obtain an injunction against a regulation that did not appear to exist, the case was dismissed.

Denominations and church associations can only address this by becoming self-insured, or establishing stop loss programs, or buying or forming their own insurance company.  In the health insurance area these are extremely difficult plans to manage.  In stop loss plans operated by the author, two or three years of below market costs would be followed by an adjustment year where the plan costs exceeded the market.  This was caused by the roll over of the excess coverage policies the plans purchased adjusting to the incredible rate of price increase in medical services prevalent for decades in western civilization.

The lesson from the Skyline case may also be that political or economic solutions are not always found in litigation.  While there are areas in which a failure to engage in legal process could cost churches their freedoms, some areas require political or economic action.  A person with one vote is not as powerful as one person with a check in moving political walls.  While the church corporation may not be able to do much politically, there is no stopping the membership.

SOME LAW IS NOT ALWAYS BETTER THAN NONE

Courts often resolve disputes in ways that neither side wanted, liked, or ever believed was a possible outcome.  This is especially true in church litigation when courts find jurisdiction to decide one issue in a church split but lack jurisdiction to decide other issues.  The partial rulings that result may also leave some disputes only partly resolved.

In Davis v New Zion Baptist Church, Slip Op., (NC App. 2018), the church split spilled into the street resulting in trial court proceedings that led to an appeal in 2015, was remanded for additional proceedings, and appealed a second time.  The combatants in this church split certainly believed in full employment for lawyers.  The church bylaws were not followed in 2013 when the then church leadership attempted to amend them.  Further, the bylaws were so badly written there was no procedure for removal of church board members and no procedure for elections of replacements.  The trial court held the attempted bylaw amendments in 2013 were void based on “neutral principles of law.”  The trial court reasoned, as did the prior appeal ruling, that bylaws governed more than ecclesiastical matters, such as property, finances and contracts, and were subject to neutral principles of law.  The trial court refused to rule on whether the church board members were properly elected but ordered the church to hold general elections within 90 days.  The court of appeals affirmed the voiding of the bylaw amendments but reversed the election order, holding that because the bylaws were silent as to election procedure, that was solely an internal church matter.  The net result was that the church leadership remained in office pending future elections but the bylaw amendments would have to be resubmitted in accord with the bylaws.  Also, the church leadership decision to disfellowship the Plaintiffs did not impact the lawsuit because the alleged wrongs occurred while they were still members but the court did not reverse their loss of membership.

One lesson to be drawn is that bylaws matter and should be competently drafted and regularly updated with the help of a lawyer hired to assist.  The lawyer selected for the task should know something of the corporation laws of the state of incorporation of the church.  The adoption of bylaws and amendments should be carefully implemented using the language of the bylaws.  Bylaws should be considered regularly and not during controversy.  The temptation to tweak the bylaws for advantage becomes too strong at such times.  Another lesson is the “official” church membership rolls should be maintained and updated at least annually in congregation run churches.  Regular updates will mean that when they are needed to determine who can vote they will be available and most probably were last updated outside of the time when a controversy arose.  Both of these lessons, bylaws and membership rolls, are as important or more important for the church with one hundred members as the church with a thousand members.  Church split lawsuits usually involve smaller rather than larger churches.

THE COLLAPSE OF THE DIKE (In Michigan)

We reported in July 2017 and September 2017 on Winkler v Marist Fathers of Detroit, Inc., Slip Op. (Mich. 2017), an opinion of the Supreme Court of Michigan that was revised. Our posts were entitled: The Finger in the Dike and The Leak in the Dike, respectively. The Supreme Court revised its own prior pronouncements that the Ecclesiastical Abstention Doctrine was jurisdictional and indicated it was not jurisdictional. If a dispute could be decided on neutral principles that did not require an inquiry into ecclesiastical decisions, then the dispute could be resolved by a Michigan court according to the Michigan high court. As we noted when we summarized the decision, the smaller and weaker the Ecclesiastical Abstention Doctrine is defined the more likely it becomes that a court, even a well-meaning one, will simply ignore ecclesiastical sensibilities. Another risk is that churches will be required to comply with laws intended to govern for-profit businesses and local governmental subdivisions, or the rules applicable to public schools, even though churches and church schools have a more fragile financial base.

In Rubinstein v Temple Israel, Slip Op., (Mich. App. 2018), the trial court dismissed the case for lack of jurisdiction. The religious school’s rule that required vaccinations and allowed exemptions only for medical reasons was narrower than state law that also allowed exemption on religious grounds. The trial court reasoned that an inquiry into whether the religious school’s determination that its students would not have religious grounds for refusing vaccinations was ecclesiastical and for that reason the trial court would not have jurisdiction to hear the case. The intermediate appellate court in Michigan, relying on the Michigan Supreme Court decision in Winkler, reversed the trial court because the Ecclesiastical Abstention Doctrine was an affirmative defense and not jurisdictional. In other words, a trial court might determine after discovery, in a summary judgment proceeding or a trial, that neutral principles could not decide the dispute but that the trial court would have jurisdiction to make that determination. Likewise, the trial court could rule that the dispute was not ecclesiastical.

The trial court on remand after the parties spend much more on litigation could hold the religious school cannot determine the religious preferences it will tolerate among its students. The trial court could reason that because a “neutral principle,” a state statute designed to preserve religious choice regarding vaccinations required by public schools, could resolve the dispute it need not make an ecclesiastical inquiry. Of course, one would think that under the First Amendment a religious school need not accommodate religious beliefs that vary from its own, whatever they are, but Michigan courts appear to want to be the final arbiter of those religious disputes.

CHURCH BOARD USURPATION PENALITIES

When a church split spills into the street and the parties decide to hire counsel and resolve it in court, there can be consequences beyond wounded feelings that do not soon abate.  It is possible that overly aggressive seizures of control, even usurpation by fraudulent means, can lead to court imposed penalties or restrictions authorized under state corporations statutes.

In Sikh Temple Turlock v Chahal, Slip Op. (Unpublished) (CA App. 5th, 2018), the church split, which involved a violent altercation at one point, resulted in competing church boards between which the trial court had to choose.  The trial court determined that the latter of the two boards “fraudulently” took authority over the church and reinstated the prior board.  In addition, the “usurpers” were barred from sitting on the church board for five years.  The court of appeals affirmed.  The appellate court viewed the five year bar as a reasonable action authorized by the state corporations statute and a good “cooling off period.”  The court also noted that the invalid election upon which the challengers were relying never happened.  However, it was deemed not valid because there was no documentation of a valid membership list as there was for the earlier election and thus no proof there had been a quorum.

Reading between the lines of the opinion, the church seemed to be suffering from antipathy of the congregation toward serving on the board.  Also, the long serving, and maybe long suffering, valid board members may have become insufficiently motivated to keep current membership lists and to require the congregation to adhere to the bylaws regarding governance.  This may have created the chaotic opening that resulted in competing boards, the latter of which tried to lock out the earlier in what the trial court viewed as a “fraudulent” usurpation.  The lessons seem obvious.