September 8, 2009

Religious Institutions Update: September 2009

Holland & Knight Update
Nathan A. Adams IV

Timely Topics

When a faith-based institution is sued, a natural first question for the business administrator is: does our insurance cover this? Too often the institution learns the hard way that the scope of the coverage or subject area liability caps were less than guessed. A surprising number of religious institutions are entirely uninsured in some of the highest-risk areas. Employment practice liability and claims against directors and officers are among these, yet many religious institutions do not even have directors’ and officers’ (D&O) insurance. Simply purchasing a policy is not enough; each policy is unique, with its own virtues and shortcomings. It is important to compare key terms, such as the definition of “claim” and the exclusions. In addition, talk to your broker, but also request an annual independent expert review of your coverage by an attorney or another person who specializes in insurance coverage questions. Also, be vigilant about coverage: the legal environment changes as do policies on a year-to-year basis. For example, as a result of the clergy sex scandal, most insurance companies have radically pared back coverage and limits for related liability. Finally, provide prompt notice in accordance with your policy to your insurer when a claim is filed, otherwise you risk waiving coverage.

Key Cases

Employment, But Not Establishment Claim Dismissed Against Religious Children’s Home

When the Kentucky Baptist Homes for Children, Inc. (KBHC) terminated a family specialist for violating its “core values” by virtue of her relationship with another woman, she sued under Title VII and the Kentucky Civil Rights Act for religious discrimination, along with a social worker who claimed that she would have applied for positions at KBHC but for the Home’s employment policies. In Pedreira v. Ky. Baptist Homes for Children, No. 08-5538, 2009 WL 2707226 (6th Cir. Aug. 31, 2009), the United States Court of Appeals for the Sixth Circuit affirmed dismissal of these claims, holding that the first plaintiff failed to allege particulars about her religion that would allow an inference that she was discriminated against on account of it. The court found the second plaintiff’s claims speculative because she failed to apply for a job. However, the original employment action was consolidated with another brought by the same plaintiffs and six Kentucky taxpayers against KBHC and various state officials, alleging they violated the Establishment Clause by virtue of KBHC’s receipt of state and federal funds. The plaintiffs argued that KBHC is pervasively sectarian and used the funds to religiously indoctrinate foster children. The district court dismissed these claims based on the plaintiffs’ lack of standing, but the Sixth Circuit reversed. The appellate court agreed that the taxpayers lacked federal taxpayer standing for lack of a sufficient nexus with the federal funding scheme. But it also held that the taxpayers had state taxpayer standing with or without a nexus to the state funding scheme, which it held unnecessary to demonstrate state taxpayer standing. The court remanded the plaintiffs’ First Amendment claims and put the district court on notice that KBHC’s hiring practices would be relevant to its Establishment Clause inquiry.

Court Orders Issuance of Temporary Certificate of Occupancy for Synagogue

In United Talmudical Academy Torah V’Yirah, Inc. v. Town of Bethel, No. 2797-09, 2009 WL 2613293 (N.Y. Sup. Ct. Aug. 24, 2009), the New York Supreme Court of Sullivan County ordered the Town of Bethel to issue a certificate of occupancy (C/O) to an orthodox Jewish congregation after it substantially completed a synagogue. The congregation received approval from the Town to replace a smaller synagogue on the premises, spent more than $2 million building the structure in plain view, complied with all necessary inspections over a period of roughly seven months, and, when ready to move in, held a last meeting with the Town. At that meeting, the congregation was told that if it completed a handful of additional items the C/O would be available on the eve of the Jewish shabbat. The congregation completed the items, but was denied the C/O after the Town Supervisor intervened. Contrary to the Town Building Inspector’s assessment, the Town Supervisor argued the structure was unsafe and should have been classified as a community center, not a house of worship, thus, requiring planning board approval. The court ordered issuance of the C/O on the grounds that the Town had expressed its position too late and the congregation had a vested due process and religious interest in receiving a temporary C/O. The court maintained jurisdiction to ensure a permanent resolution.

Negligent Hiring, Retention and Supervision Claims Against Church Constitutional in Federal Court in Missouri

The District Court for the Eastern District of Missouri parted company with the Supreme Court of Missouri in Perry v. Johnston, No. 4:09-CV-105, 2009 WL 2603101 (E.D. Mo. Aug. 24, 2009) and Goebel v. Johnston, No. 4:09-CV-106CEJ, 2009 WL 2600 750 (E.D. Mo. Aug. 21, 2009), as to whether the First Amendment permits a plaintiff to allege negligent hiring, retention and supervision claims against a church in a clergy sexual abuse case. In Gibson v. Brewer, 952 S.W. 2d 239 (Mo. Banc 1997), the Missouri Supreme Court held that “[q]uestions of hiring, ordaining, and retaining clergy…necessarily involve interpretation of religious doctrine, policy, and administration.” But in Johnston, the district court held that (1) the Catholic Archdiocese of St. Louis had not alleged any sincerely held religious principle would be in conflict with the prosecution of plaintiff’s claims; and (2) the prosecution would have a secular purpose and neither advance nor inhibit religion, and would not result in excessive entanglement with religion. Ordinarily, a district court must follow state law in a diversity action, but the district court held in this case that it had a duty to make an independent determination because the state causes of action turned entirely upon the First Amendment. The court found otherwise with respect to the plaintiff’s breach of fiduciary duty claim, which it held was not recognized under Missouri law. The plaintiff failed to plead the elements of a “negligent entrustment” cause of action.

Religious Institutions in the News

Oregon has enacted the “Oregon Workplace Religious Freedom Act” (SB 786), which provides protections for religious expression in the workplace, except for public school teachers.; Oregon, Nebraska and Pennsylvania are the last remaining states precluding public school teachers from wearing religious garb; the laws were allegedly anti-Catholic in origin. See  

The pastor of a rural Oklahoma church was found dead behind the altar. About the crime scene, the district attorney said it was the “worst he’d seen in 17 years as a prosecutor.” See,2933,541987,00.html?test=latestnews;;  

A new study sponsored by a Princeton professor correlates faith with better health. See;

The Evangelical Lutheran Church in America voted to lift a ban prohibiting sexually active gays and lesbians from serving as ministers.

A new study published by the Pew Research Center’s Project for Excellence in Journalism and the Pew Forum on Religions & Public Life finds a difference in reporting on the White House faith-based initiative during the Bush and Obama administrations. See,0,7743827.story;;

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