By Kirk Petersen

As if the divisions in South Carolina were not complicated enough, they have now led to a federal lawsuit pitting one entity affiliated with the Episcopal Church against another.

On June 11, the Episcopal Church in South Carolina (TECSC) filed suit against its own insurance company, Church Insurance Company of Vermont (CIC-VT), alleging “extraordinarily egregious bad faith” for secretly directing insurance proceeds to a breakaway parish.

CIC-VT is a subsidiary of the Church Pension Group (CPG), which describes itself as “a financial services organization that serves the Episcopal Church.” CPG is incorporated separately from the Episcopal Church (TEC) and is not carried under its budget, but CPG’s trustees are elected by TEC’s General Convention.

The lawsuit was filed on the same day that TECSC announced it is beginning the process of electing a full-time bishop, representing a major step in recovering from 2012 when more than half of the local parishes left the Episcopal Church.

In the suit, filed in U.S. District Court in Charleston, TECSC alleges that CIC-VT “secretly, knowingly, and wrongfully made payments and misdirected insurance proceeds to the insured’s disaffiliated adversaries to fund their litigation efforts” against TECSC.

Specifically, the suit alleges that CIC-VT paid $111,749 to historic St. Philip’s Church in Charleston — a church that traces its roots to 1681 — in partial coverage of legal expenses St. Philip’s incurred in the ongoing litigation over church property.

The insurance company made the payment “with knowledge that the insurance proceeds would not be held in trust for TECSC and TEC but would rather be used to fund its ongoing litigation efforts against TECSC and TEC,” according to the suit.

The suit alleges other unidentified churches may be involved, and that CIC-VT “similarly made payments and misdirected insurance proceeds to them.”

Curt Ritter, head of corporate communications for CPG, declined to comment regarding the CIC-VT subsidiary, saying the company does not comment on litigation. Holly Votaw, communications director for TECSC, declined to comment beyond a press release announcing the suit.

One unresolved question is, which side does TEC favor in the lawsuit between its diocese and its captive insurance company? Coincidentally, the Church’s Executive Council was holding its thrice-annual business meeting in Linthicum Heights, Maryland, when the suit was announced. Public Information Officer Nancy Davidge said “as is our practice, we are not going to comment on any ongoing litigation.”

The litigation is an outgrowth of the disputes over sexuality and other issues, in which the bishops of five Episcopal dioceses renounced their affiliation with TEC. In South Carolina, the break occurred in 2012, when the Rt. Rev. Mark Lawrence left with a majority of the local parishes, eventually becoming part of the Anglican Church in North America (ACNA).

As happened elsewhere in the country, the breakaway South Carolina churches kept control of the buildings where they worship. TEC contends those properties do not belong to the individual congregations, but instead are held in trust by the diocese for the use of the congregations.

TEC filed lawsuits throughout the country to regain control of the physical properties, and in 2017 the South Carolina Supreme Court issued a highly fractured and confusing ruling that awarded most, but not all, of the breakaway churches’ buildings in the state to TECSC. But the parties continue to litigate over implementation of the court’s decision, which the U.S. Supreme Court declined to review. St. Philip’s is among the churches that the South Carolina high court said must be turned over to TECSC.

The Episcopal Church in South Carolina uses that name because of a separate ruling that the ACNA-affiliated diocese owns the trademark to “Episcopal Diocese of South Carolina.” Litigation continues over that as well.

Representatives of the ACNA diocese and St. Philip’s, which are affected by the lawsuit but are not parties to it, could not be reached for comment.

The lawsuit demonstrates how complicated the situation remains in South Carolina, even as the diocese prepares to hire a full-time bishop.

TECSC has been led by Provisional Bishop Gladstone “Skip” Adams III, the former Bishop of Central New York, who has announced plans to step down from his part-time role by the end of this year.

The process of electing a new bishop often takes 18 months to two years. In the short run, the Standing Committee of TECSC will work with TEC’s deployment office to identify a full-time provisional bishop to take the reins during the search.