Insurance company sues to stop legal fee payments to Word & Way, foundation, Windermere

Insurance company sues to stop legal fee payments to Word & Way, Foundation, Windermere

By Bob Baysinger
Managing Editor

November 18, 2003

KANSAS CITY – Three rebellious Missouri Baptist Convention (MBC) agencies – Missouri Baptist Foundation, Windermere Baptist Conference Center and Word & Way – may have a new legal problem besides the case brought against them by the MBC after trustees for the three agencies voted to make their boards self-perpetuating.

Church Mutual Insurance Company (CMIC) has filed a declaratory judgment lawsuit in the U.S. District Court for the Western District of Missouri, seeking to stop paying the legal fees of the three agencies in the action involving the MBC. The company reportedly has paid legal fees for the three entities since the MBC filed a lawsuit seeking a declaratory judgment against the three on Aug. 13, 2002 .

The complaint does not disclose how much the insurer has already paid to two law firms – Armstrong Teasdale, LLC in Kansas City and Guilfoil, Petzal & Shoemake of St. Louis – on behalf of the three agencies and whether the amount of fees already paid might have to be refunded by the breakaway corporation trustees.

The Wisconsin-based insurer, according to the legal pleading, sold polices of insurance to the three agencies, insuring the three for “directors and officers liability." This type of policy is also known as “D&O coverage."

Count I of the federal complaint seeks a court interpretation of the three insurance policies, holding that Church Mutual is not obligated to pay legal fees to the agency law firms.

Church Mutual also sold insurance policies for D&O coverage to the MBC Executive Board and to three of the Missouri Baptist churches named as representative members of the MBC in the convention’s suit for declaratory judgment.

When the breakaway agencies countersued the convention, the MBC notified Church Mutual to seek the costs of defending against the counter claims. The company refused to pay any of the defense costs for the MBC, even though the company was paying defense costs for the three breakaway agencies.

Count II of the CMIC suit seeks an interpretation of the D&O insurance policies sold to the MBC and its churches. The MBC and church policies have the same basic language as the agency policies.

The CMIC complaint seeks a determination that coverage is not triggered by the counterclaims against the MBC and, as a result, no defense costs or damages must be paid to the MBC under these policies.

In a prepared statement, the MBC Executive Board welcomed the decision by Church Mutual to stop paying the legal fees of the rebel agencies. The board, however, criticized the manner in which the decision came about.

“The Convention bought D&O insurance to insure defense costs when the Convention is sued," the statement said. “The Convention has been sued when these agencies filed counterclaims, seeking perhaps millions of dollars for their legal fees and costs. Now, we discover that Church Mutual also insures three of our adversaries and is paying their legal fees.

“It is bad enough that the insurer would refuse to pay the defense costs for the Convention when we have clearly been sued by these defendants. It is outrageous that Church Mutual would pay our adversaries’ counsel while refusing to pay our legal fees. We have paid insurance premiums, too, and are entitled to coverage."

Mike Whitehead, who heads the MBC legal team in the lawsuit for declaratory judgment, said Church Mutual’s refusal to pay MBC legal fees may backfire on the insurance company.

“Church Mutual may have a hard time keeping Southern Baptist churches on their customer list when word gets out that Church Mutual doesn’t pay MBC legal fees claims but they do pay adversaries legal fees in the same lawsuit," Whitehead said.

“A company acting in this manner would be acting in bad faith."

Church Mutual sells insurance to many Southern Baptist churches and ministries across the nation and to several hundred Missouri Baptist churches. Church Mutual also serves church-related schools, camps, denominational offices and senior living facilities.

The company claims more than 87,000 religious organizations as customers, including religious institutions of all denominations and about 10,000 homeowners/tenants (including many ministers) in all 50 states.

The parties have until late December to file responsive pleadings in federal court.