S.C. diocese wins lawsuit against Church Insurance Co. of Vermont

Here’s one that has us scratching our heads a bit today at the Episcopal Cafe. A federal judge has ruled in favor of The Episcopal Church in South Carolina, ordering that its insurance company must pay for the diocese’s defense in the lawsuit brought against it by the group that broke away from the church.

We find it odd that the diocese had to sue Church Insurance Company of Vermont, an affiliate of Church Pension Group, to get the insurance company to cover these expenses, and we are wondering if any of our readers can shed light on this apparent conflict. The Episcopal Diocese in South Carolina has issued this press release:

A federal judge ruled in favor of The Episcopal Church in South Carolina on Monday, ordering that an insurance company must provide a legal defense for the local Episcopal Church diocese in the lawsuit brought against it by a breakaway group.

U.S. District Judge Patrick Michael Duffy ruled that TECSC’s commercial liability coverage in the policy issued to it by Church Insurance Co. of Vermont provides the local Episcopal diocese with coverage for “advertising injuries.”

A trademark dispute is one of the issues in the lawsuit initiated in January 2013 by former church leaders who have left The Episcopal Church but continue to claim the right to the name and service marks of the “Protestant Episcopal Church in the Diocese of South Carolina.” Because of a temporary order in that lawsuit, the recognized Episcopal diocese in this region is currently using the working name “The Episcopal Church in South Carolina.”

The ruling means that TECSC has insurance coverage for its legal defense, including costs incurred so far, in the case that is currently pending before Judge Diane S. Goodstein in Circuit Court in Dorchester County. The policy also provides coverage of up to $1 million should any damages be awarded to the plaintiffs in the breakaway group.

TECSC contacted the Church Insurance Co. of Vermont in writing last August, and was denied coverage. In September, TECSC filed the action in U.S. District Court to clarify what the policy should cover, according to Thomas S. Tisdale, Jr., Chancellor of The Episcopal Church in South Carolina.

The insurance company had argued that the breakaway group’s lawsuit does not seek to recover “damages” However, Judge Duffy ruled in favor of TECSC’s position that damages are involved because the suit asks for attorney fees, and because it seeks relief under South Carolina statutes that provide for monetary damages and attorney fees for trademark infringement.

Judge Duffy granted TECSC’s request for summary judgment on its breach of contract claim, but denied its claim for insurance “bad faith”, concluding there was not sufficient evidence to establish that the insurance company’s refusal to defend was unreasonable or a result of bad faith.

“We are delighted with this ruling and grateful that our insurance policy will be providing us with the necessary resources to continue to defend our diocese from this suit that was brought against it,” said Holly Behre, Director of Communications for TECSC.

Read the ruling here.

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