INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Refusal to make repairs nullified RCV settlement
Roughly two years after a fire loss that caused substantial damage, Crothersville Lighthouse Tabernacle Church (Lighthouse) sued its insurer. Lighthouse had a commercial property policy with replacement cost limits of $2.3 million. The policy was issued by Church Mutual Insurance Company, S.I. (Church Mutual). The church argued that its insurer was wrong to deny paying them the replacement cost for their loss. It sued Church Mutual, alleging that it acted in bad faith and was guilty of breaching their contract.
Church Mutual responded to Lighthouse by having the matter moved from a state court where the latter made its filing to a federal court. The insurer made a request for summary judgment and the court ruled in Church Mutual’s favor. Lighthouse then appealed.
Prior to litigation, Church Mutual made several payments for a total of $1.7 million. Their payments were according to the actual cash value portion of the policy’s loss settlement provision. As is common with such settlements, payments are based on a property’s depreciated (actual cash) value unless and until actual repairs begin.
The court took the salient actions into consideration. Lighthouse, while receiving various payments from Church Mutual, did not attempt any repairs. The justification it used was that it never agreed with the insurer’s replacement value estimates. Lighthouse reported fire damage to its baptismal area, classrooms, offices and sanctuary.
The valuations between Lighthouse’s public adjuster and Church Mutual’s engineering consultant were not aligned. While the insurer did make several concessions to increase the estimated replacement cost value of the loss, the difference was still significant. The center of their dispute was the cost of the sanctuary ceiling.
Rather than proceed with any construction work, Lighthouse chose to wait for an agreement from Church Mutual to make a total payment that equaled its higher estimate. Under its lawsuit, Lighthouse alleged that Church Mutual’s refusal to commit to a higher replacement cost meant a contractual breach and a failure to act in good faith. However, the lower court agreed with Church Mutual’s position that Lighthouse failed to meet the policy requirement that it had to begin repairs in order to qualify for replacement cost settlement.
Upon appeal, Lighthouse changed its argument. The position it newly presented was that the unresolved dispute justified ignoring any obligation to begin repairs. It asked the higher court to dismiss the previous ruling that the failure to begin timely repairs meant it waived its right to replacement cost reimbursement.
The higher court addressed the substantial issues. After rehashing the litigant’s actions, the lower court decision and Lighthouse’s argument (including cases it cited as relevant), it came to a quick decision.
In the higher court’s view, Lighthouse presented a different and new argument that was not presented to the lower court. Further, it never gave a proper response to the argument presented by Church Mutual that requested summary judgment based on Lighthouse’s failure to comply with the requirement to proceed with timely repairs. In the court’s opinion, the cases cited by Lighthouse in support of its new argument were not relevant. In light of its findings, the higher court ruled to affirm in favor of Church Mutual.
Crothersville Lighthouse Tabernacle Church, Inc. v. Church Mutual Insurance Company, S.I.—U.S. Court of Appeals for the Seventh Circuit—No. 22-1082—March 2, 2026.
