A breakaway Massachusetts Presbyterian church that changed its name and was in a dispute with its denomination cannot tap the directors and officers liability insurance coverage that was issued under its former name, says a federal appeals court, in affirming a lower court ruling.

In 2017, a majority of members of Newton Presbyterian Church, a member of the national Presbyterian Church (USA) denomination, voted to withdraw from the PCUASA and to affiliate with a non-Presbyterian organization, the Evangelical Covenant Church, according to  Friday’s ruling by the 1st U.S. Circuit Court of Appeals in Boston in Newton Covenant church, et al. v. Great American Insurance Co.

In March 2017, Newton Presbyterian Church and the Presbytery of Boston filed suit in state court against Newton Covenant and individuals acting as its officers, alleging trespass and “conversion,” which includes treating another's goods as one's own, according to the ruling.

According to the complaint, Newton Covenant and its officers had unlawfully exerted control over Newton Presbyterian Church and its officers had unlawfully seized control over Newton Presbyterian real property, as well as its bank accounts, following a dispute over PCUSA’s “progressive stances” on same-sex marriage and the ordination of gay, lesbian, bisexual and transgender ministers, according to the ruling. 

In March 2017, Newton Covenant submitted documentation to the Secretary of the Commonwealth in Massachusetts changing its name from Newton Presbyterian Church to Newton Covenant Church.

It submitted a notice to Cincinnati-based Great American Insurance Co. requesting a defense in state court under a $1 million D&O policy. The notice asserted that Newton Covenant was the same legal entity as the named insured. Great American denied coverage.

In November 2017, the state court awarded partial summary judgment to Newton Presbyterian Church and the Presbytery of Boston, and declared in a separate judgment that Newton Presbyterian Church was the sole and exclusive owner of the property. It also ordered Newton Covenant Church to vacate the premises. A settlement in the litigation was reached in June 2018.

In December 2018, Newton Covenant Church and its officers filed suit against Great American for breach of contract in U.S. District Court in Boston, alleging it had failed to defend and indemnify them in the state court action. The district court granted Great American’s motion to dismiss the complaint, which was affirmed by a three-judge appeals court ruling.

“Plaintiffs’ allegations are not reasonably susceptible of an interpretation that would state a claim covered under the Policy,” said the opinion, which was written by retired associate U.S. Supreme Court Justice David H. Souter, sitting by designation. 

It is uncontested the only organization named under the policy as an insured is Newton Presbyterian Church. To the extent Newton Covenant claims it was a distinct organization prior to its separate registration with the state, it was not within the definition of an insured “organization” under the policy, which covers a civil proceeding made against any “insured,” said the ruling.

To the extent Newton Covenant claims instead it was a segment of the original Newton Presbyterian Church, coverage is barred under the policy’s insured vs. insured exclusion, it said, in affirming the lower court ruling.

Great American attorney Barry S. Pollack, of Pollack Solomon Duffy LLP in Boston, said, “The unanimous opinion authored by Justice Souter recognized that parties cannot attain insurance rights merely by changing an entity’s name as registered with the Secretary of the Commonwealth and then submitting a notice of claim. Substance controls over superficial or potentially confusing name changes.”

The church’s attorney had no comment.