The devil is in the details when you file a claim with a Church Mutual Insurance Company | Property Insurance Law Blog


    Brothers, sisters, elders and pastors would do well to think carefully before taking out insurance from Church Mutual Insurance Company. Church Mutual’s claims managers will read the insurance policy looking for the most ingenious way to avoid paying the church after a disaster. Evidence of this is the recent Hurricane Michael case, where Church Mutual successfully argued that it was not obligated to pay unless the insured’s church made a formal election to receive payment based on actual cash value.

    Warning! If you’re an experienced claims adjuster, you’re already wondering how Church Mutual pulled off this legal maneuver in disbelief. Even the judge noted that there are no cases that support this argument. Perhaps this was supposed to be a sign (not from God, but from others in the business) that after hundreds of millions of claims the argument must fail. Perhaps because no insurance company would ever be so “unscrupulous” and make this argument, the outcome was the way it was.

    Our law firm strives to be the best it can be, and that means studying insurance cases every day. We spend hundreds of thousands of dollars on research materials and up-to-date computerized reports. In addition, our firm has a lawyer, a full-time professional law librarian who helps our lawyers win cases based on a variety of research. Some may think that I am this outgoing person who gives speeches or goes on a yacht in his spare time, but I spend hours every day studying insurance law. It’s not cheap to do it at a high level, but if you want to win and beat the insurance companies that make a living litigating lawsuits, you do what it takes.

    So, during these hours of study, I recently came across a newsletter, which mentioned the case of a recent a lawsuit against the church to benefit the Church Mutual Insurance Company against Hurricane Michael. I am involved in several very important cases in the aftermath of Hurricane Michael, and our firm represents a number of Churches throughout the United States. This random note from a newsletter that should help me find relevant cases piqued my interest. Church Mutual obtained a judgment against the insured’s own church, which was a victim of Hurricane Michael. I was interested.

    The case file states that there was sealed jury verdict. I have never seen a record in federal court with a sealed jury verdict. I have been doing this business for 40 years. I became even more interested. The unsealed verdict, available for viewing (but only if you subscribed to another computer service), contained the following:

    I have done this my entire adult life. I have never seen such a question put before a jury. This is unheard of. So, I dug deeper.

    The judge’s previous summary judgment order explained the arguments made by the church’s mutual insurance company:

    St Michael’s Anglican Catholic Church owns property which is insured by the Church Mutual Insurance Company (CMIC). After Hurricane Michael damaged the property, CMIC made four payments – totaling nearly $100,000 – based on an Actual Cash Value (“ACV”) determination of the loss, St. Michael’s, believing the damages were greater, sued for the difference.

    CMIC claims it owes nothing more because St. Michael’s has never officially chosen to renew ACV. The insurance contract provided for “replacement cost” coverage, but only if St. Michael’s repaired or replaced the damaged property, which it admittedly did not do. CMIC “will not pay on a replacement cost basis” until and unless “actual repairs” are insured[s] or replace[s] . . . as soon as possible”). The policy also provides that St. Michael’s can be claimed for actual cash value even if it has not been repaired or replaced. This provision is at the heart of the parties’ dispute.

    CMIC’s motion raises two complex questions: whether St. Michael’s should have formally elected to cover ACV, and whether St. Michael’s actually did so.

    The court then turned to the language of the policy:

    The Assessment section, in turn, provides for this

    [i]f The replacement cost is shown on the declarations page. . . we will determine the value of the covered property. . . as follows:

    (1) At replacement cost (less depreciation) at the time of loss or damage. . . .

    (2) You can file a claim. . . on an [ACV] instead of replacement cost. In case you choose to cover the loss or damage [ACV] base:

    (a) We will then determine the value of the covered property at [ACV] basis. . . ;

    (b) You may still make a claim based on the Replacement Value if you notify us of your intention to do so within 180 days of the date of loss or damage.

    The judge then noted what Church Mutual argued:

    Based on this wording, CMIC argues that claims under the policy are replacement value (“RCV”) by “default” such that the policyholder must take steps to obtain payment based on the ACV….(“Make a claim without of election is to make a choice to continue the benefits of RCV Otherwise the word ‘elected’ in the policy would be superfluous.’).

    Analyzing this argument, the judge wrote:

    This is unclear to me for several reasons. First, CMIC failed to articulate what a positive ACV election looks like. See the hearing at 56:8-57:19. And CMIC cites no case law supporting its construction. Furthermore, the assessment subsections are not clearly hierarchical: the RCV subsection is not individually prioritized, and the ACV subsection is not clearly subordinate. Finally, as St. Mickle points out, the Loss Responsibilities section is silent on the need for the insured to formally make an ACV as opposed to an RCV claim.

    On the other hand, “instead” suggests replacing something new (ACV valuation) with something already in place (RCV valuation). And persuasive authority suggests that the Eleventh Circuit may agree that the policy requires an affirmative ACV claim. See Buckley Towers Condo., Inc. v. QBE Ins., 395 F. App’x 659, 664 (11th Cir. 2010) (‘[T]provided for by the insurance contract [a] methods of claiming compensation. . . without having to repair or replace anything – the insurer’s requirement to comply with a properly executed ACV claim.’)

    I could write a review article on why the judge should never have allowed this aspect of the argument to go to the jury. Employees of my firm say with disbelief that “no one settles claims this way.” This is true. The insurance industry teaches its insurance adjusters to pay the actual cash value until replacement costs are incurred or what the policy requires for additional benefit over replacement cost.

    So, until this case is rectified, my suggestion is to request in writing that payment be made for the actual cash value before the replacement, and then pay the replacement cost benefits.

    There is another lesson that relates to the Church Mutual Insurance Company. Maybe their leaders don’t know about this case, or maybe they do. If Church Mutual is an honest and transparent insurance company that cares about its insureds who are church leaders, Church Mutual should publicize this case as a warning of what the church can expect if the church makes an insurance claim against it property. Otherwise, she must publicly take the bold step and abandon her position.

    Here’s what Church Mutual says about its values:

    “We recognize that our customers are the company.”

    “We are driven by a purpose.”

    “We act with pride.”

    “We are courageous and brave.”

    “We share your commitment to serving and inspiring others and work alongside you not only to protect your people and property, but just as importantly, your faith-based mission.”

    Many preachers are good speakers. However, we all know that actions speak louder than words. Let’s see what Church Mutual does in this case.

    Thought for the day

    Give me a hundred preachers who fear nothing but sin and desire nothing but God, and I don’t care whether they are spiritual or worldly, they alone will shake the gates of hell and establish the kingdom of heaven on earth.
    – John Wesley

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