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Bishop Theodore L. Brooks, Sr. Presiding Bishop

Maxie D. Dobson, CPA (Retired) LLM Executive Editor

Wyatt McDowell, JD, Senior Editor

CONCORD BAPTIST CHURCH V. CHURCH MUTUAL INSURANCE COMPANY, 2021 WL 6095643 (W.D. Mo. 2021)

Church’s Failure to Cooperate With Its Insurance Company Excused the Insurer From Duty to Pay the Church’s Insurance Claim

This case addresses the question of whether an insurance company remains liable on an insurance policy to the insured church when the church fails to cooperate in the investigation of the insurance claim(s).

Facts

This case arises from an insurance policy Church Mutual issued to Concord Baptist Church to insure its properties. Subsequently, Concord Baptist Church claims it sustained substantial property damage after a severe storm on March 27, 2020. Church Mutual received the claim on March 31, 2020.

On April 2, 2020, and April 13, 2020, Church Mutual’s third-party adjuster, Crawford & Company, met with Concord Baptist Church’s representative to inspect the damage to the property. On May 26, 2020, Crawford & Company issued an estimate based on the engineering report completed after the inspections. As a result, Church Mutual issued two partial payments to Concord Baptist Church totaling $237,852.24.

Once the payments were issued, a disagreement arose between the parties as to the amount of loss. On June 3, 2020, Concord Baptist Church sent a demand for appraisal to reevaluate the damage to its property. On June 9, 2020, Church Mutual acknowledged the demand for appraisal and requested that Concord Baptist Church submit any documents supporting its claim. On November 24, 2020, after Concord Baptist Church informed Church Mutual that its appraiser would be reappraising the entire claim, including damages that Church Mutual had already issued partial payments for, Church Mutual requested that Concord Baptist Church submit a revised demand for appraisal. Concord Baptist Church also suggested to Church Mutual that its appraiser’s estimate would be over $2,000,000. On December 3, 2020 Concord Baptist Church submitted a revised demand for appraisal.

On December 4, 2020, Church Mutual notified Concord Baptist Church that to move forward in the appraisal process it would require a proof of loss form, supporting documents, and a representative to submit to an examination under oath (“EUO”). Church Mutual reiterated its requests in a letter dated December 10, 2020, after Concord Baptist Church did not respond.

On February 18, 2021, Concord Baptist Church filed suit alleging Breach of Contract and Vexatious Refusal to Pay (action against any insurance company to recover a loss under a policy).

Discussion

First, Church Mutual alleges that Concord Baptist Church failed to comply with the cooperation agreement in its policy.

Missouri courts have consistently acknowledged an insurer’s right to a complete investigation of a claim, including examinations, and have found that the insured’s failure to assist in the investigation precludes (rules out) any coverage. To deny coverage, an insurer must prove: (1) a material breach of the cooperation clause; (2) the existence of substantial prejudice as a result of the breach; and (3) the exercise of reasonable diligence to secure the insured’s cooperation.

First, Concord Baptist Church’s failure to provide, or the untimely submission of, a proof of loss form constitutes a material breach of the cooperation agreement. Also, if the insured fails to submit to an EUO before commencing the lawsuit, that also constitutes a material breach of the cooperation agreement.

Second, when Church Mutual requested more information to effectively evaluate the revised demand for appraisal, including the proof of loss form, supporting documents, and an EUO, the failure to comply by Concord Baptist Church substantially prejudiced Church Mutual because it could not possess all the information needed to investigate the claim.

Lastly, the insurer must prove that it exercised reasonable diligence to secure the cooperation of the insured. More specifically, the insurer “must present evidence to show what steps it took to locate insured and to secure his cooperation in defending the action.”

Here, Church Mutual exercised reasonable diligence in attempting to secure Concord Baptist Church’s cooperation. As soon as Church Mutual received Concord Baptist Church’s revised demand for appraisal it sent a letter the next day requesting that Concord Baptist Church submit a proof of loss form, supporting documents and comply with an EUO. Concord Baptist Church did not respond. Church Mutual followed up by sending another letter on December 10, 2020, reiterating its request for a proof of loss form, supporting documents, and an EUO. Concord Baptist Church once again failed to respond or submit the documents. Instead of responding or submitting documents to Church Mutual, Concord Baptist Church filed a lawsuit. Based on these facts, Church Mutual exercised reasonable diligence to secure the cooperation of Concord Baptist Church.

Conclusion

Concord Baptist Church failed to show substantial compliance with the cooperation agreement contained in the insurance policy, which relinquishes Church Mutual from liability. When a claim for breach of contract fails, so too does a vexatious refusal to pay.

Bottomline

Most insurance policies impose a “duty to cooperate” on the insured. This means that a church, as the insured, must cooperate with its insurance company in any investigation, or in responding to reasonable requests for information. Church leaders should be aware of this requirement and understand that a failure to cooperate in a timely manner may result in the denial of insurance benefits, including both a legal defense and indemnification (coverage for damages and other costs associated with the claim). Source: www. churchlawandtax.com.

Numerical Decline in Young Americans Who Trust in Christ

One survey after another shows increasing numbers of young people leaving the church. Gallup reported this year that belief in God had declined 10 percentage points in about 10 years. According to Barna, the percentage of Americans who qualify as “practicing Christians” (meaning they identify as Christians, prioritize their faith, and have attended church within the past month) has dropped from 50 percent in 2009 to 25 percent in 2020. Source: Christianity Today, September 2022, p. 11)

Fewer Than Half of Americans May Be Christian by 2070, According to New Projections

America has long prided itself on being a country where people can choose whatever religion they like. The majority has long chosen Christianity. By 2070, that may no longer be the case. If current trends continue, Christians could make up less than half of the population — and as little as a third— in 50 years. Meanwhile, the so-called nones — or the religiously unaffiliated — could make up close to half of the population. And the percentage of Americans who identify as Muslims, Jews, Hindus, Buddhists and other non-Christian faiths could double.

Those are among the major findings of a new report from the Pew Research Center regarding America’s religious future—a future where Christianity, though diminished, persists while non-Christian faiths grow amid rising secularization. Source: https://religionnews. com (09/13/22)

The PAW Reporter is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. “From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations.”