九色

An Indiana church seeking payment at replacement-cost level for fire damage to its property learned the hard way that procrastination can carry a price tag.

A federal appeals court ruled last week that Church Mutual does not owe replacement-level coverage to Lighthouse Tabernacle Church in Crothersville, Indiana. Higher replacement-cost benefits applied only if the church promptly made repairs, which it did not, the court said.

The 7th Circuit Court of Appeals said Lighthouse Tabernacle waited far too long to argue it was relieved of a contractual obligation to timely rebuild.

The underlying dispute involved whether Church Mutual owed anything beyond baseline coverage for actual cash value of the church.

Lighthouse Tabernacle’s church building caught fire in June 2018, causing extensive damage to the sanctuary, offices, classrooms, and baptismal area. The policy with Church Mutual carried a $2.3 million property-loss limit and provided replacement-cost coverage only under the condition that Lighthouse Tabernacle repaired the property “as soon as reasonably possible.”

Replacement-cost insurance covers “the difference between what [a] property is actually worth and what it would cost to rebuild or repair that property,” as defined in court proceedings. The baseline coverage for the policy was the property’s actual cost value, which accounts for depreciation.

From the start, Lighthouse Tabernacle sought payment at replacement-cost level, but disputes soon arose over estimates of the cost to replace the building. Church Mutual paid $1.2 million for the undisputed cash value of the property, and in the months that followed paid another $500,000 to cover additional agreed amounts.

Each check was accompanied by a letter that stated the payment was based on the actual cash value, and for Lighthouse Tabernacle to recover replacement costs in excess of the amount, it should complete repairs within 180 days and provide receipts.

Over the next two years, Lighthouse Tabernacle objected to Church Mutual’s repair estimates and adjustor reports, while not making any progress on reconstruction to the church. In June 2020, Lighthouse Tabernacle sued Church Mutual for breach of contract and bad-faith denial of replacement-cost benefits.

A district court granted Church Mutual’s motion to dismiss, ruling that Lighthouse Tabernacle failed to engage with the insurer’s central argument related to the church’s failure to comply with the policy’s prerequisites for replacement-cost recovery. Any disputes over replacement cost estimates were irrelevant, the district court said.

In an appeal to the 7th Circuit, Lighthouse Tabernacle argued it was unable to begin repairs while the dispute over the replacement-cost estimates remained unresolved. The church argued the dispute relieved it of its contractual obligation to promptly make repairs, citing a pair of Indiana Court of Appeals rulings.

The latter argument, which was new on appeal, isn’t permissible to be reviewed. If Lighthouse Tabernacle wanted to advance that argument, it should have done so earlier, the court ruled.

“We’ve observed that litigants who ‘do not do their legal research until after losing in the district court have wasted a judge’s valuable time,'” the court wrote.