In a big win for a church, a United States District Court docket in Texas just lately issued a decisive ruling in First Baptist Church of Bitter Lake v. Church Mutual Insurance coverage Firm. 1 The case centered on an insurance coverage protection dispute involving a discount in coverage limits with out sufficient discover, and the end result reinforces key shopper protections embedded within the Texas Insurance coverage Code.
On the coronary heart of the dispute was a parsonage constructing insured beneath a coverage that, in 2019, carried a $209,000 substitute price worth. In subsequent renewal years, nevertheless, Church Mutual Insurance coverage Firm unilaterally decreased the restrict to $139,000. The church didn’t explicitly consent to this transformation, and the insurer failed to supply correct statutory discover alerting the church to the protection discount. When the parsonage sustained injury and the insurer utilized the decreased restrict, litigation ensued.
The church argued that Church Mutual violated Texas Insurance coverage Code § 551.056(c), which requires insurers to present advance discover if a renewal coverage comprises adjustments that scale back or limit protection. The discover should be conspicuous and clear, so the insured could make knowledgeable choices. The renewal letter Church Mutual issued didn’t fulfill this statutory requirement. The trial courtroom agreed with the church’s place that the faulty discover rendered the discount in protection ineffective and triggered statutory treatments designed to guard insureds from shock limitations.
The insurer argued that the church ought to have learn the coverage and been conscious of the change. Nevertheless, the courtroom, following established Texas precedent, rejected the insurer’s “duty-to-read” protection on this context. The courtroom discovered it inconsistent with each shopper safety ideas and the aim of statutory discover provisions. The truth that no conspicuous discover was given and that the church had persistently maintained full protection for over fifteen years bolstered its argument.
The courtroom additional dominated that, beneath § 551.054(b) of the Insurance coverage Code, the 2019 coverage remained in impact by operation of legislation. As a result of Church Mutual didn’t fulfill the discover necessities beneath the Texas Code and in addition didn’t problem a legitimate discover of nonrenewal or cancellation beneath § 551.054 and § 551.055, the insurer was handled as if it had not lawfully modified the coverage. The courtroom acknowledged that beneath Texas legislation, if an insurer makes an attempt to resume a coverage with materially altered phrases with out correct discover, it’s legally equal to failing to resume or improperly cancelling the coverage altogether. In such instances, the earlier coverage continues in impact.
Because of the jury verdict and the courtroom’s post-trial rulings, the First Baptist Church of Bitter Lake recovered a complete of $994,634.59. This sum included $209,000 in precise damages, representing the proper protection beneath the reformed coverage. However the courtroom didn’t cease there. It additionally awarded $418,000 in extra damages beneath § 541.152(b) of the Insurance coverage Code, which supplies for enhanced damages when a statutory violation is dedicated knowingly. These extra damages signify a type of punishment and deterrence, acknowledging that the insurer’s conduct went past mere oversight. The courtroom additionally awarded $58,217.60 in statutory penalty curiosity beneath § 542.058 for delayed fee, $28,598.04 in pre-judgment curiosity beneath the Texas Finance Code, and $275,740 in legal professional’s charges. The judgment consists of a further $40,000 in appellate legal professional’s charges ought to the insurer pursue and lose an enchantment.
This case serves as a reminder that insurers should strictly adhere to statutory discover necessities when altering coverage phrases. A mere coverage renewal letter isn’t sufficient if it fails to alert the policyholder to vital adjustments in a daring and conspicuous method.
The choice demonstrates how legislators can shield shoppers from insurance coverage corporations making refined, but substantial adjustments to insurance policies with out clear disclosure. Not all states comply with this rule. Some states, corresponding to Florida, have enacted anti-consumer laws that enables insurers to bury these adjustments on the time of renewal with out offering a treatment.
For policyholders, particularly non-profit establishments like church buildings that depend on constant and reliable protection, this ruling confirms that courts will implement these protections and maintain insurers accountable once they fall quick.
Thought For The Day
“The rule of legislation implies that the legislation applies equally to everybody—particularly to these in positions of energy.”
— Justice Sonia Sotomayor
1 First Baptist Church of Bitter Lake v. Church Mutual Ins. Co., No. 1:23-cv-00391 (E.D. Tex. July 22, 2025). See additionally, Plaintiff’s Temporary, and Defendant’s Temporary.