On April 10, 2020, a federal appellate court in Boston ruled for PSD’s client. In the case, a group of church members sought a seven-figure damages award. The claims arose from an insurance coverage dispute. In the ruling, the court focused on a coverage exclusion. Justice David Souter authored the opinion.
On January 15, 2017, a group of church members voted to withdraw from a Presbyterian organization. The “break-away” group called themselves the “Newton Covenant Church.”
On March 17, 2017, the insured Presbyterian church brought a lawsuit in state court against the “break-away” group. The state court complaint alleged trespass and conversion. According to the complaint, the “break-away” group exerted control over real property and bank accounts. As alleged, the dispute followed the church’s “progressive stances” on same-sex marriage and the ordination of gay, lesbian, bisexual and transgender ministers.
On March 23, 2017, the “break-away” group changed the church’s name at the Secretary of the Commonwealth from “Newton Presbyterian Church” to “Newton Covenant Church.” The “break-away” group then submitted a notice to the Great American Insurance Company seeking coverage in the state court action under a Directors and Officers insurance policy. Later, the “break-away” group lost a summary judgment motion, Then, the “break-away” group settled the state court action.
In the federal case that followed, the “break-away” group challenged a denial of coverage.
The trial court granted PSD’s motion for summary judgment that invoked a coverage exclusion.
Appellate Ruling for PSD’s Client
Writing for the court, Justice Souter rejected the “break-away” group’s arguments. In the opinion, the court found no significance to the change of corporate status. The court held:
[T]o the extent that NCC claims it was a distinct organization even prior to its separate registration with the State, it was not within the definition of an insured “Organization.” To the extent that NCC claims instead that it was a segment of the original NPC at the time of the state court complaint, coverage is barred for another reason: § IV.H of the Policy. That provision, one of a handful of “Exclusions” under the Policy, precludes coverage for claims between insureds…. And, finally, to the extent that NCC claims it was the original organization that had simply undergone a formal name change, once again that would implicate §IV.H’s exclusion.