Wade Clark Mulcahy LLP

<p style="text-align: justify;">Tax-exempt religious organizations are known for keeping the details of their financial situation under tight wrap.  This can make certain situations difficult, particularly during litigation when those details might be relevant to the subject issue.  But what about in the context of a religious organization as an insured? How much information is enough, and how deep can an insurance company dig? The question here is whether certain details of a religious organization’s financial details can be revealed to an insurance company and to what extent.</p>
<p style="text-align: justify;">Thankfully, the First Department addressed this very issue in <em><a href="https://www.wcmlaw.com/wp-content/uploads/2021/08/Church-of-St-Matthew-v-Aetna-Cas-And-Sur-Co.pdf">Church of St. Matthew v. Aetna Cas And Sur Co</a>.</em> Plaintiff in that case was an Anglican Catholic Church insured by defendants, Aetna Casualty &amp; Surety Co. The church had sustained major losses when a fire of unknown origin destroyed the church building and everything inside. The Church was insured under a comprehensive policy and was covered for loss and damage caused by the fire, and so a claim was naturally filed. However, in addition to other documents, the defendant insurance company sought very detailed financial information of their insured, including: (1) authorizations for all bank records maintained; (2) a list of monthly expenses for the church; (3) a reporting of the income of the church, including the names of donors and the amounts donated; (4) copies of tax returns for the church, as well as for its board of officers and directors; (5) a list of the salaries of the board of directors and officers; and (6) an authorization to the Internal Revenue Service to obtain documents that were seized by that agency in an unrelated matter.</p>
<p style="text-align: justify;">The plaintiff church objected to this overbroad request, arguing that they had already provided all relevant documents, including bank statements from four different banks, and that the additional documents requested by the defendant insurance company either did not relate to the subject matter of the insurance or was otherwise protected by the church’s code of confidentiality. Meanwhile, the defendant insurance company maintained that they were entitled pursuant to a provision in the policy which stated that the insurer “may examine and audit the named insured’s books and records at any time during the policy period and extensions thereof and within three years after the final termination of this policy, as far as they relate to the subject matter of this insurance.”</p>
<p style="text-align: justify;">The First Department ultimately held that the defendant insurance company was entitled to the requested documents insofar as they are material and relevant to the issue of the plaintiff church’s financial status at the time of the fire. Not only that, the plaintiff church was also obligated to permit the insurance company to examine and audit its books and records, pursuant to the contractual provision within the policy. However, the Court did hold that there was no sufficient basis for the defendant insurance company to access the personal financial information of the plaintiff church’s board of directors and officers, or the names of any church donors. A lesson to read the provisions of any insurance policy carefully, as they will likely control.</p>
<p style="text-align: justify;">Thanks to Tristan Montaque for his contribution to this post.  Please email <a href="mailto:gcoats@wcmlaw.com">Georgia Coats</a> with any questions.</p>