1. Archive

Presbytery sues insurer for historic $30-million

A charity fund established some two centuries ago for poor ministers and their families _ now said to be worth $30-million _ has taken center stage in a lawsuit pitting Philadelphia Presbyterians against an insurance company.

The Presbytery of Philadelphia established the colonies' first insurance company, later named the Presbyterian Ministers' Fund, in 1759 to provide low-cost insurance to poor ministers and their families. It was funded over the next five years by 6,400 British pounds from Presbyterians in England, Scotland, Ireland and the colonies.

In 1991, PMF was renamed the Covenant Life Insurance Co. to reflect its expanded low-cost coverage to non-Presbyterian clergy. Then, in 1994, Covenant merged with Provident Mutual Life Insurance Co., a for-profit company.

Under the merger agreement, Covenant president Robert Kloss remained as chief executive of Provident, but Covenant ceased to exist as a separate non-profit corporation and Provident gained control of Covenant's assets and insurance policies. According to court papers, Provident decided not to focus on clergy members as clients.

"If you give money to a charity for a certain purpose, they are bound to use it for what it was intended," said Presbytery attorney Frank Baldwin. "Now that this commercial insurance company is no longer providing low-cost insurance, we'd like to have the money back."

Before the merger, Covenant had a surplus of $60-million to $100-million, Baldwin said, but its board of directors pushed for a merger with a larger company so that Covenant could offer more products and services to its policyholders. The Presbytery is seeking $30-million traced to the original 6,400-pounds sterling donations, based on a 3 percent annual inflation rate since 1764.

The Presbytery, a group of 150 congregations based in the Philadelphia area, wants the money to supplement wages and retirement funds for clergy members, including non-Presbyterians.

"We don't see the work of the Presbyterian Ministers' Fund being done as it used to be," said James Eby, chairman of the Presbytery's general council.