Bhd. Mut. Ins. Co. v. Salem Baptist Church of Jenkintown

• Decision Date: 01 November 2013
• Docket Number: CIVIL ACTION NO. 10-CV-7072
• Parties: BROTHERHOOD MUTUAL INSURANCE COMPANY, Plaintiff, v. SALEM BAPTIST CHURCH OF JENKINTOWN, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

BROTHERHOOD MUTUAL INSURANCE COMPANY, Plaintiff,
v.
SALEM BAPTIST CHURCH OF JENKINTOWN, et al., Defendants.

CIVIL ACTION NO. 10-CV-7072

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

November 1, 2013

DECISION

JOYNER, J.

This Declaratory Judgment action was tried non-jury before the undersigned on July 8, 2013. The parties have submitted their proposed factual findings and legal conclusions and the matter is now ripe for adjudication. Having carefully considered all of the evidence, we now make the following:

FINDINGS OF FACT

1. Plaintiff Brotherhood Mutual Insurance Company is an insurance company duly authorized by the Insurance Commissioner of Pennsylvania to issue insurance policies in the Commonwealth of Pennsylvania and has its principal place of business at 6400 Brotherhood Way, Fort Wayne Indiana, 46825. (Pl's Amended Complaint; Defendant's Answer thereto, ¶ 1).

2. Defendant, Salem Baptist Church of Jenkintown (hereafter "Salem"), is a Pennsylvania non-profit corporation with its

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principal place of business at 610 Summit Avenue, Jenkintown, Pennsylvania, 19046. (Pl's Am. Compl.; Def's Ans., ¶ 2).

3. In the fall of 2008, at the behest of Terri White, then-chairperson of its Board of Trustees, Salem undertook to compare various other insurance plans to the commercial general liability insurance policy under which the church was then insured by Church Mutual Insurance Company. This comparison was undertaken with the goal of securing the best possible insurance option that was most cost effective and not as the result of any dissatisfaction on Salem's part with Church Mutual's services or policy. (Tr. Ex. 18, p. 16, 39-40, 44-45).

4. Brandon Bower, an account executive and sales representative for the James O. Bower Insurance Agency, met with Terri White at the Salem Baptist Church on or about October 2, 2008. (N.T. 7/8/13, p.7-8). This meeting between Mr. Bower and Ms. White had been arranged by Brotherhood Mutual Insurance Company's marketing department as a result of a "cold call" by a Brotherhood salesperson to Salem. (N.T., p. 6).

5. During this meeting, Mr. Bower examined Salem's premises and obtained much of the information he would need to complete an application for coverage. Most, but not all, of this information was provided by Ms. White. (N.T. 7).

6. Because there was some information about the buildings that Ms. White didn't have at that time, Mr. Bower followed up

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with several telephone conversations and a second visit to the church several weeks later. (N.T. 8). Thereafter, on December 9, 2008, Mr. Bower again returned to the church and gave a formal proposal to some six representatives of the church board or leadership. In conjunction with or immediately following this presentation, Mr. Bower prepared a formal application on behalf of Salem for an insurance policy with Plaintiff Brotherhood. (N.T. 8-10; Tr. Ex. 2).

7. Among the questions on the application for insurance were the following inquiries on page 5:

"Has your organization or its leaders (in connection with your organization) been a party to any lawsuit during the past five years?"
Are you aware of any past or present situation or dispute that could result in a claim or lawsuit being made against your organization or its leaders?

(Tr. Ex. 2, p. 5; N.T., 10).

8. In his preparation of the Brotherhood application, Mr. Bower asked Ms. White to answer both of these questions. Ms. White's response to both of these inquiries was "no." (Tr. Ex. 2, p. 5; Tr. Ex. 18, 78-79; N.T. 10-11).

9. At the time that Salem was exploring its insurance options, Ms. White knew that the church was involved in a dispute over the construction of its Family Life Center buildings with Delta Organization, the general contractor for the job and that Delta claimed that Salem owed it monies. (Tr. Ex. 18, 68-69;

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N.T. 12).

10. This dispute, which was in the nature of an arbitration action before the American Arbitration Association, had been commenced by Delta against Salem on July 30, 2007 pursuant to the dispute resolution provision in the contract between those parties. Specifically, Delta was seeking damages ostensibly resulting from Salem's non-payment of the significant additional expenses incurred by Delta as the result of having to maintain a presence on Salem's construction site for some 9 more months than originally agreed to and for Salem's termination of the parties' contract without prior notice or opportunity to cure. (Complaint in Logan and Delta Alliance, LLC v. Salem Baptist Church of Jenkintown, et. al., Civ. A. No. 10-0144, at ¶s 36-42).

11. Plaintiff issued General Liability Policy No. 37M5A0381574 to and for Defendant which was first effective on January 1, 2009 and had a policy period of three years, until January 1, 2012. (Pl's Am. Compl.; Def's Ans., ¶s 1, 7; Tr. Ex. 1).

12. Included in this policy were certain "Church Organization Additional Coverages." (N.T. 43; Tr. Ex. 1, BMIC0122). Under this sub-heading, the policy read as follows in relevant part:

PERSONAL INJURY LIABILITY COVERAGE
We pay all sums that you, your leaders, your employees or your appointed persons become legally obligated to pay as

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damages due to personal injury to which this coverage applies. The event or events causing the personal injury:

a. must arise out of the religious or not-for-profit operations of your organization; and
b. must take place in the coverage territory during the policy period.

This Additional Coverage will apply to personal injury resulting from electronic data transmissions (such as E-mail) and from the posting of information on an electronic communication network (such as the internet), provided that claim for such injury is brought in the basic territory.
The Personal injury coverage of this endorsement does not apply, however, if the personal injury arises out of:

1. the oral or written publication of material done by or at the direction of you, your leader or your employee if you, your leader or your employee publishes the material knowing that it is false; or
2. The publication of information through any advertising, publishing, broadcasting or telecasting operation or facility which is owned or operated by you.

13. The term "personal injury" is defined elsewhere in the policy:

Personal injury means injury arising out of one or more of the following offenses:
a. oral or written publication of material that slanders or libels a person or entity; that disparages a person's or entity's goods, products, or services; or that violates a person's right of privacy; or
b. malicious prosecution or false arrest, detention, or imprisonment of a person; or
c. wrongful entry into, wrongful eviction from, or invasion of the right of private occupancy of a

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premises occupied by a person, but only if such offense is committed by or on behalf of the owner, landlord or lessor of the premises; or
d. infringement of copyright, slogan, trademark, or trade name; or
e. unauthorized reproduction, display, or other use of music, hymns, commentaries, study aids or other similar material in the course of your operations.
But personal injury does not include bodily injury, property damage, emotional injury or financial damage of any kind; nor any injury arising directly or indirectly out of or in connection with any sexual act, counseling act, or discriminatory act.

(N.T. 43-44; Tr. Ex. 1, BMIC 0207).

14. The policy, however, also states the following in pertinent part under the title "EXCLUSIONS":

Each of the exclusions set forth in the Exclusions section of the Commercial Liability Coverage Form (GL-100) and the Liability and Medical Coverage Form (BGL-11) apply to each of the Additional Coverages provided by this endorsement, unless otherwise modified herein. The following exclusions apply to the Additional Coverages of this endorsement.
1. Exclusion 1 of the Exclusions That Apply to Bodily Injury and Property Damage section of the Commercial Liability Coverage form (GL-100) is modified as follows:

We do not pay for loss of any kind:
a. that is expected by, directed by, or intended by any insured or by any covered person; or
b. that is the result of any willful, wanton or malicious act of any insured or any covered person.

But Exclusion 1.a. above does not apply to bodily injury that arises out of the reasonable use of force to protect people or property, or to bodily injury or emotional injury

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sustained by a child in your care as the result of reasonable disciplinary action directed toward the student by a covered person authorized to undertake such disciplinary action as part of your nursery/child care operations.

(Tr. Ex. 1, BMIC 0125).

15. In its response to Delta's arbitration complaint, Salem asserted a counterclaim against Delta for breach of contract and fraud asserting that Delta had not paid its subcontractors for the work performed on the Salem project but had instead misappropriated Salem's payments. (Am. Compl. in Logan v. Salem Baptist Church, Civ. A. No. 10-0144, at ¶ 43).

16. Salem retained the law firm of Eastburn and Gray...