United States: Religious Institutions Update: August 2016

When was the last time your organization reviewed your insurance policies? Not all policies are equal. Many religious organizations are underinsured. Most should have general liability, property, professional liability, directors and officers (D&O), commercial auto or hired and non-owned auto insurance, workers' compensation and umbrella insurance. Supplemental to general liability coverage, many churches will need endorsements for fine art items, such as paintings, tapestries, stained glass, ornamental woodwork or tiles, and musical instruments, such as organs. They also will want to ensure that they cover damage suffered by, or damages caused by, not only the officers and employees, but also members and volunteers to the extent feasible. In the event of counseling or other professional services, religious institutions need professional liability coverage to guard against malpractice, negligent counseling, breach of confidential information and invasion of privacy claims. D&O coverage is essential to protect against claims made as a result of an action that a director, officer or board member made on behalf of the organization. Transportation risks involving high-capacity and rented vehicles are substantial ones for churches, schools and social service organizations. Beyond this, many religious institutions will want to consider employment practices coverage.

Purchasing the right policies is not the only thing that is important; carefully evaluating coverage is equally so. Most policies exclude altogether certain types of claims, such as sexual harassment or claims without physical injuries, thereby excluding emotional distress, except perhaps in connection with "bodily injury." Other policies offer a legal defense, but no liability coverage. Nearly all liability policies exclude coverage for intentional injuries, and some define the concept broadly. Some policies let you hire the defense counsel of your choice up to a particular hourly rate (with the insured paying any difference), whereas others do not. When evaluating your insurance profile, independent brokers are helpful resources, but so can be lawyers who specialize in coverage evaluation. In some situations, they may recommend self-insurance options including captive insurance entities that enable organizations to benefit from low loss ratios, rather than their insurance companies reaping the benefits.

Key Cases

Appellants Lack Standing to Challenge Florida Tax Credit Scholarship Program

In McCall v. Scott, Case No. 1D15-2752 (Fla. 1st DCA Aug. 16, 2016), the court ruled that the appellants lack standing to challenge the Florida Tax Credit Scholarship Program (FTCSP) because they failed to allege that they suffered any special injury and failed to establish that the legislature exceeded any constitutional limitation on its taxing and spending authority when it authorized the program. Appellants challenged the FTCSP under Florida's Blaine amendment, article I, section 3 of the Florida Constitution, and Florida's requirement for uniform and adequate funding for school education, article IX, section 1(a) of the Florida Constitution. Under the FTCSP, taxpayers make voluntary contributions to scholarship funding organizations (SFOs) and receive a tax credit. Eligible parents and guardians apply to SFOs to secure a scholarship for their student at a school of their choice, including religious and nonreligious schools. Eligibility hinges on low income level.

Hospital System Does Not Qualify for Church-Plan Exemption to ERISA

In Rollins v. Dignity Health, Case No. 15-15351, 2016 WL 3997259 (9th Cir. July 26, 2016), the court of appeals affirmed the lower court's decision finding that Dignity Health, the result of a merger between hospital systems established by the Sisters of Mercy Congregations in Auburn, California and Burlingame, California, does not qualify to have a "church plan," notwithstanding a 1983 General Counsel Memorandum from the Internal Revenue Service stating the opposite. The court ruled that: (1) to qualify for the church-plan exemption of the Employee Retirement Income Security Act (ERISA), a plan must have been established by a church and maintained either by a church or by a principal-purpose organization; (2) it was not required to give deference to the IRS memorandum; and (3) its determination that a plan must have been established by a church to qualify for the church-plan exemption does not unconstitutionally discriminate against certain religious organizations or interfere with internal matters of church governance in violation of the First Amendment.

Public Grants to Private New Jersey Universities Struck Under State Constitution

In Am. Civil Liberties Union of N.J. v. Hendricks, 445 N.J. Super 452 (N.J. App. 2016), the court ruled the award of public grants from a bond initiative to Princeton Theological Seminary and Beth Medrash Govoha (the Yeshiva) violated article 1, paragraph 3 of the New Jersey Constitution, which states: "No person shall be deprived of the inestimable privilege of worshipping Almighty God in a manner agreeable to the dictates of his own conscience; nor under any pretense whatever be compelled to attend any place of worship contrary to his faith and judgment; nor shall any person be obliged to pay tithes, taxes, or other rates for building or repairing any church or churches, place or places of worship or for the maintenance of any minister or ministry, contrary to what he believes to be right or has deliberately and voluntarily engaged to perform." The funds were to be expended on classrooms, libraries, and computer and audio-visual equipment, not places of worship or "ministries." The Yeshiva specializes in advanced undergraduate and graduate Talmudic scholarship. Princeton Theological Seminary is associated with the Presbyterian Church (USA).

Court Enjoins Mississippi Protecting Freedom of Conscience from Government Discrimination Act

In Barber v. Bryant, No. 3:16-CV-417-CWR-LRA, 3:16-CV-442-CWR-LRA, 2016 WL 3562647 (S.D. Miss. Jun 30, 2016), the court enjoined under the Establishment Clause and Equal Protection Clause a Mississippi statute, HB 1523, which states that Mississippi will not discriminate against citizens who hold one of three "sincerely held religious beliefs or moral convictions" reflecting disapproval of lesbian, gay, transgender and unmarried persons. By "discrimination," the law refers to consequences in the realm of taxation, employment benefits, court proceedings, licenses and financial grants. The court ruled that the law violates the Establishment Clause because the state has preferred certain religious beliefs over others; i.e., those who believe that same-sex couples should marry. The court ruled that the law violates the Equal Protection Clause because it has the design, purpose and effect to single out lesbian, gay, bisexual and transgender (LGBT) and unmarried citizens for unequal treatment under the law. The state argued that HB 1523 is justified by a compelling government interest in accommodating the free exercise of religion, but the court found that the state failed to identify any actual, concrete problem of free exercise violations that could not be remedied under the state Religious Freedom Restoration Act or otherwise. The court also found that HB 1523 violates the First Amendment because its religious exemption comes at the expense of other citizens.

Polygamy Challenge Mooted

In Brown v. Buhman, 822 F. 3d 1151 (10th Cir. 2016), the court ruled that a section 1983 action filed by a polygamist family challenging the constitutionality of Utah's bigamy statute was moot because of the county attorney's announcement of a policy limiting "bigamy" prosecutions to circumstances also involving child or spouse abuse, domestic violence, welfare fraud or another crime. The statute at issue referred to bigamy, but extended liability to defendants with more than two spouses. The appeals court overturned the district court's decision in favor of the plaintiffs on the grounds that the court lacked subject matter jurisdiction due to the policy. The court denied that it was material that the county attorney's successor could change the policy, that the county attorney viewed the statute as constitutional or that the timing of the announcement was opportune. As to the last point, the court observed that the mid-proceeding announcement actually assures compliance because failing to observe it could expose him to prosecution for perjury or contempt of federal court.

Church Challenge Dismissed to California's Abortion Services Mandate in Health Coverage

In Foothill Church v. Rouillard, in her official capacity as Dir. of the Cal. Dep't of Managed Health Care, No. 2:15-cv-02165-KJM-EFB, the court dismissed the complaint of several churches arising from letters issued by the California Department of Managed Health Care to seven private health insurers that required them to remove any limitations on or exclusions of abortion services from the health care coverage they offer. Plaintiffs sued under the Free Exercise, Establishment, Free Speech and Equal Protection Clauses. The court determined that the letters and underlying laws were neutral and generally applicable and that California had a rational basis for them. Plaintiffs argued they were not neutral because, inter alia, the director issued the mandate after learning that two Catholic universities eliminated elective abortion coverage from their health care plans and knew that the mandate would primarily affect churches and religious employers. The court referred to these allegations as conclusory and speculative. Plaintiffs argued that the law was not generally applicable because of several exemptions and because the director has discretion to grant additional individual exemptions and waivers. The court disagreed and said the letters apply equally to insurers regardless of whether the motivation for the limitations or exclusions is religious or secular. The court ruled that a reasonable observer would not view the director's letters as sending primarily a message disapproving religion, and that the director had a plausible secular purpose for his conduct, preventing any Establishment Clause claim.

Church Road Sign Not an Establishment of Religion

In Tearpock-Martini v. Borough, No. 3:12cv2223, 2016 WL 3959034 (M.D. Pa. July 22, 2016), the court ruled that Shickshinny Borough did not violate the Establishment Clause by allowing and assisting with the placement of a road sign stating "Bible Baptist Church Welcomes You!" The sign included a directional arrow containing the words "one block" and two symbols, a cross and a Bible. A sign for the church had been occasionally located at or near the same site since the 1980s. The court considered the sign a religious display, but ruled that a reasonable observer would think it is a sign to a church and nothing more. The court also ruled that the action had a secular purpose; i.e., to provide direction, and did not create excessive entanglement with government.

Mandatory Prayer Violates Establishment Clause

In Marrero-Méndez v. Calixto-Rodríguez, former Carolina Area Commander for the Puerto Rico Police Dep't, No. 14-2030, 2016 WL 3902635 (1st Cir. July 19, 2016), the court ruled that superior police officers violated the Establishment Clause by holding group prayer while on duty and punishing an officer for his non-conformance. The court denied qualified immunity to the officers on the grounds that they should have known their conduct constituted illegal religious coercion. Officer Guillermo Calixto, a regional commander, summoned 40 officers for a meeting in the parking lot of a shopping mall to discuss a plan for an intervention to take place nearby. This was in the nature of a monthly meeting, at the conclusion of which Calixto asked for a volunteer to lead the group in prayer. Officer Alvin Marrero called Calixto aside and objected. Calixto became upset and directed Marrero to "abandon the formation." Then, Calixto ordered him, as he was walking away from the group, to stop and stand still for the duration of the prayer. Calixto then shouted, in front of the entire formation, that Marrero was standing apart from the group because "he doesn't believe in what we believe in." After complaining about the incident and filing an administrate complaint, Marrero was transferred to a post where he was deprived of his usual law enforcement responsibilities.

Ecclesiastical Abstention Doctrine Precludes DUTPA, Breach of Contract and Other Claims

DUTPA Claim Against Secular Funeral Home

In Mammon v. SCI Funeral Servs. of Fla., Inc., No. 4D15-1788, 2016 WL 3002341 (Fla. 4th DCA 2016), the court ruled that a widow's action against a secular funeral home for violation of the Florida Funeral, Cemetery and Consumer Services Act and the Florida Deceptive and Unfair Trade Practices Act (DUTPA) was barred by the ecclesiastical abstention doctrine. The plaintiff claimed that the defendant misrepresented that her deceased husband would be buried in accordance with "Jewish burial customs and traditions." In particular, she observed non-Jews buried near her husband, which she said violated these traditions. The defendants relied upon two papers suggesting disagreement about this. The court dismissed the case because it determined that it could not decide the case without determining what constitutes "Jewish burial customs and traditions," which is, at its core, an ecclesiastical matter.

Breach of Contract Against Catholic School

In re St. Thomas High School, No. 14-16-00114-cv, 2016 WL 2854412 (Tex. App. [14th Dist.] May 12, 2016), the court ruled the ecclesiastical abstention doctrine required dismissal for lack of subject matter jurisdiction of a student and his parents' claim against a Catholic high school not owned by a church for breach of contract after the school expelled him. The reason for the expulsion was the parents' harassing conduct related to dissatisfaction with how faculty handled their child's objection to test grades and the parents' false accusation of sexual harassment against their child. The school fully reimbursed the parents for prepaid tuition for the spring semester. The court first found that the abstention doctrine applies to the school, although not a church. Second, the court determined that the parents' letter and original petition invoked spiritual standards, and that judicial resolution of the claim would interfere with the organization's management of its internal affairs or encroach upon its internal governance.

Breach of Contract, Collusion and Fraud Against Sikh Temple

In Singh v. Sandhar, No. 14-15-00087-CV, 2016 WL 2743314 (Tex. App. [14th Dist.] May 10, 2016), the court ruled that the trial judge lacked subject matter jurisdiction over the claims of purported members of a Sikh temple against the executive committee for breach of contract, collusion, and fraud, alleging that they were not included on an approved temple membership list and that the organization did not follow its bylaws.

Declaratory Judgment Against Church

In Mouton v. Christian Faith Missionary Baptist Church, No. 01-15-0088-CV, 2016 WL 3345478 (Tex. App. [1st Dist.] May 24, 2016), the court ruled that the trial court lacked subject matter jurisdiction under the ecclesiastical abstention doctrine over former church members' action seeking various declarations and money damages relating to their expulsion from church and the church's purported failure to follow its bylaws regarding pastoral selection.

Ecclesiastical Abstention Doctrine Does Not Preclude Fiduciary Duty and Other Claims

Breach of Fiduciary Duty Claim Against Pension Board

In Bacon v. Bd. of Pensions of the Evangelical Lutheran Church in Am., No. A15-1999, 2016 WL 3961960 (Minn. App. July 25, 2016), the court ruled that it has jurisdiction under a neutral principles of law approach over appellants' argument that the defendant breached its fiduciary duty by failing to exercise reasonable care, skill and diligence in managing the assets of a retirement plan, and failing to act in the exclusive interest of participants in the selection and retention of plan investment options. The court found that the plan documents contain the fiduciary duties, such that resolution of the dispute would not disturb a ruling of an ecclesiastical body and could be resolved under a neutral law, the Minnesota Prudent Investor Act. The court ruled that dismissal also was not required under the Minnesota Freedom of Conscience Act because adjudicating the case would not burden the exercise of religion.

Wage and Hour, Breach of Contract and Title VII Claims Against Churches

In Bigelow v. Sassafras Grove Baptist Church, 786 S.E. 2d 358 (N.C. App. 2016), the court ruled that the ecclesiastical abstention or ministerial exception doctrine does not bar a former pastor from stating a claim for breach of a written employment contract for an indefinite term and violation of the Wage and Hour Act against his former church for failure to pay compensation and benefits allegedly due him when he became disabled. The court distinguished the applicability of the ministerial exception doctrine because the plaintiff's complaint did not challenge the church's decision to terminate his employment, but instead sought to enforce a contractual obligation regarding his compensation and benefits. The court distinguished the applicability of the ecclesiastical abstention doctrine because the court could decide plaintiff's contract-based claims applying "neutral principles of law," rather than ecclesiastical doctrine or church law.

In Collette v. Archdiocese of Chicago, No. 16 C 2912, 2016 WL 4063167 (N.D. Ill. July 29, 2016), the court denied the defendants' motion to dismiss a lawsuit that the former Director of Worship and Director of Music for Holy Family Parish filed when he was terminated after defendants learned that the plaintiff was engaged to and intended to marry his same-sex partner. Plaintiff sued under Title VII, the Illinois Human Rights Act and the Cook County Human Rights Ordinance for employment discrimination based on sex, sexual orientation and marital status. The court ordered limited discovery into factors such as whether the plaintiff's position involved significant religious training and a recognized religious mission. The court rejected the defendants' argument that the title alone of his position was sufficient to cause dismissal under the ministerial exception doctrine.

In Jackson v. Mt. Pisgah Missionary Baptist Church Deacon Bd., No. 1-14-3045, 2016 IL App (1st) 13045 (Ill App. [1st Dist.] June 30, 2016), the court ruled that the ecclesiastical abstention doctrine did not preclude the trial court from determining whether a church violated its bylaws and thereby breached an oral employment contract as alleged by its former pastor; however, the court ruled that the church had not in fact violated them.

College Properly Excluded Applicant Who Brought Up Religion Too Much

In Buxton v. Kurtinitis, No. JFM-14-2836, 2016 WL 3582004 (D. Md. June 28, 2016), the court granted summary judgment in favor of the Program Director and Coordinator of Radiation Therapy at the Community College of Baltimore County against the Plaintiff's Establishment Clause and Equal Protection claims. Plaintiff was not admitted to the program because, among other reasons, he allegedly brought up religion a great deal during his interview, and the director therefore assumed he would do so with patients. The court ruled there was no Establishment Clause violation because the director had a secular purpose for her assessment: not to have religious beliefs expressed to patients who did not raise the issue. Because the record showed that the director selected two candidates who made faith-based statements, the court also ruled that the plaintiff failed to prove that he was disfavored for mentioning religion.

Religious Institutions in the News

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