Will your church’s insurance defend suits involving gay marriage or sexual orientation?

In the wake of the Supreme Court’s Obergefell decision, churches are worried about lawsuits.

An increased risk of suit.

This isn’t an irrational fear. I don’t think any Court will soon order ministers to perform a service that conflicts with the minister’s faith.

But there is a shift in public opinion that makes it plausible in the future. The definition of ‘fairness’ is changing. In the past, if one minister or church refused to marry a couple, the couple would find another minister or church. This was “fair,” even if insulting. Many Americans now believe insults are injurious to their personal dignity. That feeling can produce lawsuits.

The more immediate threat will be attempts to tax or exclude churches. Many state and local governments will, in the next year, pass broad ‘non-discrimination’ laws. Even conservative legislators are wary of giving exemptions to churches. Churches will be asking Courts to read First Amendment-required religious accommodations into those laws. But if religiously motivated work cannot operate on religious principles, then work in charity, adoption, civic organizations, disaster relief, and education will be in flux.

Few churches will be sued in a given year. Most of them will win. But every church should prepare. In the future, the person standing at the door of the church, knocking, may be a sheriff delivering a lawsuit.

Prepare by examining your insurance

An important question, then, is whether the church’s insurance policy will pay to defend the suit. Winning a long court battle can feel like losing, after the costs of litigation. And activist groups sometimes choose weak, underinsured defendants. They hope you will be unable to defend yourself, and capitulate quickly. Having a strong defense can make you a less attractive target.

To churches, this will seem like any other lawsuit — like a car accident, or a negligence claim. In those cases, insurance companies pay for lawyers and cover damages.

But on gay marriage claims, insurance companies are hedging. The risks are high, and uncertain. What happens when public accommodations must offer services regardless of sexual orientation, but a church continues to provide services based on the traditional definition of marriage? Right now, we do not know. So it
is no surprise to see a major church insurer, Southern Mutual Church Insurance, issue a Bulletin to agents that denies any coverage for these claims.

At least, the company denies coverage under their standard policy. For a few more dollars, it will sell a ‘rider’ that pays up to $25,000 to defend most suits, but nothing for settlement or damages. But $25,000 is barely enough to litigate some simple cases, let alone these complex cases about religious liberty. And the rider still excludes coverage for “intentional acts.” Is it intentional to stand by the traditional definition of marriage if the law requires otherwise? We don’t know.

Today: insurers hate uncertain legal risks.

Until the legal situation clears up, I would expect most insurers to deny coverage for suits in this area. That may or may not be the right reading of the policy language. But until they know more, insurance companies have a strong incentive to say the suits are outside coverage.

Many ‘basic’ policies already exclude employment disputes, civil rights violations, and intentional misconduct. I can see insurers arguing that these exclusions now apply.

Tomorrow: optional coverage for predictable risks.

After a few years, the risk picture will clear up. Once they understand the risks, insurers may offer optional coverage, for extra premiums. It will be more important for churches to shop for the coverage they need. The lowest price on a “basic” policy might not cover enough.

What if I’m sued and my insurer says it won’t cover the case?

If a church is sued and the insurer denies coverage, talk to your lawyer as soon as possible.

In fact, any time a church is sued, it is worthwhile to talk to a lawyer not paid by the insurance company. Insurance companies can be sued for improper denials of coverage. If the insurance company’s improper decision leaves you in a lurch, it may be liable for extra damages.

Also consider approaching public interest law firms like Alliance Defending Freedom, the Becket Fund, Liberty Counsel. Your lawyer may be affiliated with some of these groups, and put you in touch. It’s not quite the same as having insurance, but it may be the best option available. Also, their lawyers understand churches well.

While I am confident Obergefell is not the end of the world for churches, it does bring new issues to courts. It is time for churches to prepare.