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The Episcopal Church in South Carolina sues Church Insurance for “bad faith” payments to breakaway parishes

The Episcopal Church in South Carolina sues Church Insurance for “bad faith” payments to breakaway parishes

A news release from The Episcopal Church in South Carolina (TECSC) details a complaint filed in federal court against The Church Insurance Roth Company of Vermont. The complaint alleges that “the company acted in bad faith by wrongfully making secret payments to churches that have sued TECSC, helping to fund their litigation against the diocese” during the years-long legal battles to determine ownership of the identity and property of parishes which split from the Episcopal Church in 2012 and set up a competing diocese in South Carolina.

TECSC reports:

The complaint, filed in the U.S. District Court in Charleston, seeks actual and punitive damages from The Church Insurance Roth Company of Vermont (CIC-VT), which is a captive insurance company of The Episcopal Church that has provided TECSC with insurance coverage since the early 2000s for diocesan and parish properties.

“Captive” insurance is a form of self-insurance in which a parent group or groups create an insurance company to provide coverage for itself.  In this case, The Episcopal Church is the parent company and CIC-VT has a fiduciary duty to The Episcopal Church and its affiliated dioceses and parishes that it insures.

“Such duties include fiduciary duties of loyalty and care to insure risks only for TEC and its affiliates, and to properly process insurance claims only for the benefit of TEC and its affiliates,” the complaint says.

The complaint involves a group led by Bishop Mark Lawrence that announced it was disaffiliating from The Episcopal Church in 2012, and filed a lawsuit seeking to take the identity and property of the diocese and its churches.

According to the complaint, TECSC recently discovered that CIC-VT paid insurance proceeds to at least one of the disaffiliated parishes, St. Philip’s Church in downtown Charleston. This discovery came through an annual report published online by St. Philip’s that said “After spending for TEC legal fees, Loan Amortization, and Capital Expenditures, St. Philip’s incurred a net cash deficit of $79,045. However, roughly half of the TEC Legal Fees were eligible for partial reimbursement from the Church Insurance Co. of Vermont, totaling some $111,749.”

The payments were wrongful because CIC-VT cannot legally insure parishes not affiliated with the Church, the complaint says. The complaint cites evidence that “similar wrongful conduct also occurred with respect to the Lawrence Diocese and/or additional Lawrence Parish Entities” with payments, insurance proceeds or settlements from CIC-VT which have not been publicly disclosed, but will be subject to the legal discovery process in court.

The Episcopal Church in South Carolina, as the recognized diocese of The Episcopal Church, has a trust interest in all diocesan and parish property including “all rights to insurance policies protecting such property and receivable insurance proceeds,” the complaint says.

In August 2017, the South Carolina Supreme Court ruled that diocesan property, along with the property of 29 parishes, including St. Philip’s, are held in trust for The Episcopal Church and TECSC.

“For the last seven years, the Lawrence Diocese and 29 of the Lawrence Parish Entities have unlawfully possessed and controlled and have been misusing, depleting, and diminishing the diocesan and parish property held in trust for TECSC and TEC. They still do today,” the complaint says. “They refuse to accept and obey the final decision of the South Carolina Supreme Court. They are currently opposing its enforcement in the state circuit court, on remittitur. They are also opposing an action pending in this Court seeking an injunction against their ongoing trademark infringement, vonRosenberg v. Lawrence.”

The complaint says CIC-VT hashas enabled and aided and abetted at least one Lawrence Parish Entity in breaching such fiduciary duties, participating by wrongfully paying and misdirecting insurance proceeds to it for the known purpose of funding their litigation efforts against TECSC and TEC.”

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Tim Kruse
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Tim Kruse

I wonder if there is a process in which the CIC-VT is informed that one of its policy holders is no longer affiliated with TEC? If not, and St. Philip's continued to mail in their premiums, I'm left with Hanlon's Razor to explain what happened. The discovery phase will be enlightening.

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Christopher SEITZ
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Christopher SEITZ

I join you in your basic question. That said, why would CIC-VT not know quite clearly about St Philips? This is information fully in the public. I believe TECSC sued them earlier re their own legal costs.

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Kenneth Knapp
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Kenneth Knapp

I wish the progessives and the conservatives could find it in their hearts to be kinder to each other.

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Christopher SEITZ
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Christopher SEITZ

Here is a very simple question. One assumes that the Church Insurance Company is subject to the usual audits. What, therefore, does the word "secret" mean, as in "wrongfully making secret payments to churches"? Said Insurance company, an Episcopal operation, makes secret payments? Secret from whom? And why would they make "secret" payments we are being told they do not need to make and should not have made? What would be their motivation -- making secret payments to anyone?

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Christopher SEITZ
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Christopher SEITZ

"As if the divisions in South Carolina were not complicated enough, they have now led to a federal lawsuit pitting one entity affiliated with the Episcopal Church against another.

On June 11, the Episcopal Church in South Carolina (TECSC) filed suit against its own insurance company, Church Insurance Company of Vermont (CIC-VT), alleging “extraordinarily egregious bad faith” for secretly directing insurance proceeds to a breakaway parish." -- The Living Church

I wonder if the legal team in SC working for TECSC is now operating without coordination with 815. There is probably a back story here.

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Steve Price
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Steve Price

Did the leadership of St.Phillip's commit fraud in the filing of this claim?

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