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Episcopal Church in South Carolina Seeks Dismissal in Case vs. Church Insurance

Episcopal Church in South Carolina Seeks Dismissal in Case vs. Church Insurance

In the latest court filing involving the Church in South Carolina (TECSC)’s property disputes with the ACNA diocese, TECSC has filed motions to dismiss.

Late yesterday, on Thursday, July 18, 2019, The Episcopal Church in South Carolina (TECSC) filed multiple motions with the U.S. District Court in Charleston asking the federal court to dismiss motions and counterclaims filed by the Church Insurance Company of Vermont (CIC-VT). In the initial filing on June 11, 2019, TECSC argued that CIC-VT acted in bad faith and secretly funded TECSC’s disaffiliated adversaries in litigation against TECSC. (See previous blog post here.)

CIC-VT’s motion for declaratory judgment, filed three days later on June 14, 2019, was “attempting to justify the decision it already made to fund TECSC’s disaffiliated adversaries in litigation against TECSC,” according to the memorandum of law filed July 18 by TECSC. In addition to the motion for declaratory judgment, CIC-VT also filed a counterclaim and third-party complaint in the bad faith action, as well as motions for joinder and consolidation. (See previous blog post here.)

​The memorandum of law filed July 18, 2019, explains why CIC-VT’s declaratory claim, pled in both actions, should be dismissed on the pleadings as a matter of law and equity, and also why CIC-VT’s motions for consolidation and joinder should be denied as “moot and futile.”

The press release goes on to describe the basic outline of the case, and concludes that:

After laying out the many reasons supporting dismissal, the filing notes that CIC-VT’s motions for consolidation and joinder should be denied as “moot and futile.”  In addition, it notes that the denial is appropriate because “the addition of numerous parties to the bad faith action initiated by TECSC against CIC-VT is unnecessary and would unduly complicate and prolong that case and burden and prejudice TECSC.”

The memorandum of law filed by TECSC is available in full here.


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Kenneth Knapp

All the endless property litigation over the years has started to remind me of Jarndyce v Jarndyce.

Joan R. Gundersen

If you read the actual suit filed by the Episcopal Church in SC you would know that Church Insurance is a “captive insurance company” only able to insure groups that are part of The Episcopal Church, and not even licensed in SC. The bodies it continued to cover insisted they were NOT part of the larger body called the Episcopal Church. Any payments made for litigation should have been made to the group recognized by the Episcopal Church. Those claiming to have separated from TEC were not eligible to be insured by Church Insurance. Church Insurance made this very defense when sued by the breakaway group in 2012 because it denied their claims, and in a 2015 settlement. Now it is trying to argue the reverse.

mike geibel

There is more than one insured under the policy, including affiliates. I doubt that an insurer in Vermont agreed to settle with a breakaway diocese in South Carolina because it agreed with their stand on gender identity issues or SSM. It denied coverage in 2012, filed an action to declare its denial was correct and got sued by the breakaways for damages. In 2015, it settled for mutual dismissals in exchange for payment of some of the fees. Sounds like a business decision not some nefarious desire to fund the breakaways. It was not certain that the court would later find that find TEC was the sole owner of the name ECofSC. What we don’t know is whether the TEC really didn’t suspect the settlement until 2019, or whether this allegation is there to avoid the statute of limitations. The same insurer may also have been paying some of the fees by the TEC. Never rely on only one party’s pleadings for the whole story.

Christopher SEITZ

“Those claiming to have separated from TEC were not eligible to be insured by Church Insurance.”

Repeating this does not explain why Church Insurance would make payments if it were so obvious…why would they hand out money to entities unentitled to have coverage? Just to do so?

After all, if people are paying for coverage–even if you say they should not be entitled to it–Church Insurance would have to have refused payments.

The irritating thing in this story is that facts could so easily be known.

Kathleen Stanley

Could someone please translate this for us non-lawyers? Thank you.

mike geibel

Translation: The break-off diocese, claiming to be the true TEC, demanded the Church insurer defend it in the litigation over church property and the use of the name “Episcopal” church of SC. The insurer denied any duty to defend and was promptly sued by the break-off diocese for bad faith and punitive damages. Rather than risk being held liable, the insurer settled by agreeing to reimburse some of the defense costs and fees.The State Court later ruled in favor of the TEC.

The TEC then sued the insurer claiming it had wrongfully aided its enemy by paying some of its fees and costs. The Insurer filed counter-actions asking the Court declare its rights and obligations and wants all the claims consolidated before the same judges. The TEC wants those cross claims/actions dismissed.

In this profession we have a saying: “He who sues my client is my friend.” When a believer takes
another believer to court, he has lost the battle already. Corinthians 6-7.

Christopher SEITZ

Thanks for this.

The other unanswered piece in this is why an insurance company would hand over cash to EDSC parishes, unless they had bona fide policies with them. The TECSC group has made it sound like this was some secret payment to an enemy (as you put it). I have never known an insurance company to just hand out cash to unentitled entities and do it secretly so no one could know about their “benevolence.”

There are just a lot of unanswered questions in all of this.

mike geibel

Insurers have a duty to defend an insured if there is a “potential” for coverage, even if ultimately the claims are proven false. Wrongful failure to defend makes them liable for breach of contract, and if their denial was unreasonable (bad faith), subject to punitive damages. This started in 2013, and I suspect the insurer settled the lawsuit against it before the state court ruled in favor of the TEC and its sole right to use the name EC of SC. Unless there is a consent clause, insurers do not need the consent of their insureds to settle.

Lawyers attach words like “secret,” “conspiracy,” and “bad faith,” to their allegations much like politicians call their opponent “racist,” “Nazi” or “deplorable.” The TEC spent a lot of pledge money prosecuting its case. The suit against the insurer is not about same sex marriage, transgender bathrooms, sanctuary churches, social justice or whether the Bishop Corp. Sole vs. the parishioners owns the property. This lawsuit is about—money.

Donald Caron

I’m assuming that the insurer accepted policy payments from the break-away parishes and diocese.

Christopher SEITZ

Mr Caron, I think you have probably captured the reality, though I might put it this way:

“Parishes of long standing, who have been faithful payers for Church Insurance over many many years, the aforesaid CIV saw no reason to discontinue, and so compensated what the policy they had been paying for over the years, and had continued to, obliged.”

I could of course be wrong.

But short of this, why would they be compensating anyone?

TEC and TECSC can be in an uproar; and their supporters can opine about captive this and that; and they can spend endless dollars in suits; but they have failed to explain matters as efficiently as you have done.

Christopher SEITZ

Thanks, all true.

What does not seem to be clear in any reports is the high likelihood that EDSC parishes have valid policies. Why else would Church Insurance make a payment? Just because they have cash to throw around? That seems highly dubious.

Instead we get lots of obvious chatter about ‘captive insurance’ etc.

It would be helpful if we knew the facts about the status of EDSC insurance coverage, instead of TEC proponents decrying their receiving funds, as if they were trustees of the Insurance co in question.

We know that TECSC sued its own insurance once before.

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