Brothers, sisters, elders and pastors should think twice before getting insurance from Church Mutual Insurance Company. Church Mutual’s claims adjuster will read the policy and look for the most ingenious way to not pay a church after a disaster. Evidence of this can be found in a recent Hurricane Michael case where Church Mutual successfully argued that it had no obligation to pay any money unless the insured church made a formal election to be paid at actual cash value.
Warning! If you are an experienced claims adjuster, you are already wondering how Church Mutual pulled off this legal maneuver and are in disbelief. Even the judge noted that there were no cases to support the argument. Perhaps that should have been a sign (not from God, but others doing this work) that after hundreds of millions of assertions the argument should fail. Perhaps because no insurance company would ever act in such “bad faith”; and make this argument, the outcome turned out the way it did.
Our law firm is dedicated to being the best we can be, and that means studying insurance cases every day. We spend hundreds of thousands of dollars on research materials and current computerized reports. In addition, we have a lawyer in our firm who is a full-time professional law librarian who helps our lawyers win cases based on all kinds of research. Some might think I’m this outgoing guy who gives speeches or sails in my spare time, but hours of every day are spent studying insurance law. Doing this at a high level is not cheap, but if you want to win and beat insurance companies that provide a legal process, you do what it takes.
So, during those hours of study, I recently came across a newsletter that mentioned a case with a recent judgment against a church in favor of the Church Mutual Insurance Company involving Hurricane Michael. I am involved in a couple of very valuable cases left over from Hurricane Michael, and our firm represents a number of churches throughout the United States. This random note from a newsletter to help me find relevant cases piqued my interest. Church Mutual filed a judgment against its own insured church, which was a victim of Hurricane Michael. I was curious.
In the case it appeared that there was one sealed jury verdict. I have never seen a document with a sealed jury verdict in federal court. I have been doing this work for 40 years. I was even more curious. The unsealed judgment that we can see (but only if you subscribe to another computer service) contained the following:
I have done this my entire adult life. I have never seen a sentencing question put to a jury like this. It is incredible. So I dug deeper.
An earlier summary judgment order by the judge explained the argument of Church Mutual Insurance Company:
St. Michael’s Anglican Catholic Church owns property insured by Church Mutual Insurance Company (“CMIC”). After Hurricane Michael damaged the property, CMIC made four payments – totaling nearly $100,000 – based on its determination of the actual cash value (“ACV”) of the loss, St. Michael’s, believing the damages were higher, sued for the difference.
CMIC claims it owes nothing more because St. Michael’s never formally opted for an ACV reset. The insurance policy provided “replacement cost” coverage, but only if St. Michael’s repaired or replaced the damaged property, which it admits it did not do. CMIC “will not pay on a replacement cost basis” until and unless the insured “actually repairs[s] or replace[s] . . . as soon as reasonably possible”). The policy also stipulates that St. Michael’s may receive actual cash value, even if it did not repair or replace. This provision is at the heart of the parties’ dispute.
CMIC’s motion presents two difficult questions: whether St. Michael’s needed to formally elect ACV coverage and if St. Michael’s actually did.
The court then turned to the policy language:
The evaluation section, in turn, provides that
[i]f Replacement cost is shown on the declaration page. . . we will determine the value of the covered property. . . that follows:
(1) At replacement cost (without deduction for depreciation) at the time of loss or damage . . . .
(2) You can make a claim. . . on a [ACV] rather than on a replacement cost basis. If you choose to have loss or damage settled on one [ACV] basic:
(a) We will then determine the value of Covered Property at a [ACV] foundation. . . ;
(b) You can still make a claim for replacement cost if you notify us of your intention to do so within 180 days of the date of the loss or damage.
The judge then noted what Church Mutual argued:
Based on this language, CMIC says that claims under the policy are replacement cost value (‘RCV’) ‘by default’, so an insured must take steps to seek payment on an ACV basis…(‘Making a claim without election is do the choice to proceed with benefits in the RCV. Otherwise the word “elected” in the policy is superfluous.’).
Analyzing this argument, the judge wrote:
This is not clear to me, for several reasons. First, CMIC was unable to articulate what an affirmative choice of ACV looks like. See Hearing at 56:8-57:19. And CMIC cites no case law supporting its construction. Furthermore, the valuation subsections are not clearly hierarchical: the RCV subsection is not face-prioritized, and the ACV subsection is not explicitly subordinate. Finally, as St. As Michael’s points out, the policy’s loss section obligations are silent on the need for an insured to formally make an ACV as opposed to an RCV claim.
On the other hand, ‘instead’ suggests that something new (ACV valuation) be replaced by something that already exists (RCV valuation). And persuasive authority suggests that the Eleventh Circuit might agree that the policy required an affirmative ACV claim. See Buckley Towers Condo., Inc. v. QBE Ins., 395 F. App’x 659, 664 (11th Cir. 2010) (‘[T]the insurance contract prescribes [a] ways to seek compensation. . . without having to repair or replace anything – the requirement for the insurer to meet a properly made ACV claim.’)
I could write a law review article on why the judge should never have let this aspect of the dispute go to the jury. Members of my company are in disbelief and say things like “no one adjusts claims like this.” This is true. The insurance industry teaches its policy adjusters to pay for the actual cash value until claims costs occur or whatever the policy requires for the additional claims cost benefits.
So until this case is rectified my suggestion is to request in writing that payment be made for actual cash values until compensation occurs and then pay compensation cost benefits.
There is another lesson, and it is about the Church Mutual Insurance Company. Maybe their leaders don’t know about this case, but maybe they do. If Church Mutual is an honest and open insurance company that looks out for its policyholders who are church leaders, then Church Mutual should publicize this case as a warning of what to expect if a church makes a property insurance claim with it. Otherwise, it should publicly take the bold step of abandoning its position.
This is what Church Mutual says about its values:
“We recognize that our customers are the company.”
“We are driven by purpose.”
“We act with honor.”
“We are brave and courageous.”
“We share your commitment to serving and inspiring others and work with you not only to protect your people and property, but just as importantly, your faith-based mission.”
Many preachers give a good sermon. But we all know that actions speak louder than words. Let’s see what Church Mutual does in this case.
Give me a hundred preachers who fear nothing but sin and desire nothing but God, and I don’t care if they are priests or laymen, they alone will shake the gates of hell and set up the kingdom of heaven on earth.
– John Wesley