Judge rules insurers not liable for Newport Group’s AME Church pension lawsuit

A federal judge has ruled that three insurers do not have to provide coverage for Newport Group’s potential liabilities arising from a lawsuit alleging years of mismanagement and self-dealing involving the African Methodist Episcopal Church’s retirement plan.

U.S. District Judge Alex G. Tse granted summary judgment to Homesite Insurance Co., Argonaut Insurance Co. and Ironshore Indemnity Inc., while denying Newport Group Holdings and Newport Group Inc.’s request for partial summary judgment.

The complaint alleges that “Newport entered a conspiracy starting in 2001 to misappropriate funds, defraud, and manage the African Methodist Episcopal Church Ministerial Retirement Annuity Plan for its own benefit.”

The ruling from the U.S. District Court for the Northern District of California centers on a prior acts exclusion in Newport’s primary insurance policy.

The insurers argued that the exclusion eliminates coverage because the alleged wrongful acts underlying the AME Church retirement plan litigation began before Aug. 31, 2018. Newport disputed that interpretation.

Judge Tse sided with the insurers.

Prior acts exclusion

The policy excludes coverage for wrongful acts occurring before Aug. 31, 2018, as well as later wrongful acts that, together with an earlier act, constitute “Interrelated Wrongful Acts.”

The policy defines interrelated wrongful acts as actual or alleged errors, misstatements, misleading statements, acts, omissions, neglects or breaches of duty that are causally connected through common facts, circumstances, situations, transactions or events.

A central issue was whether allegations in the underlying lawsuit were enough to establish that the acts were interrelated. The judge concluded they were..

Newport had argued that actual facts, rather than allegations, were required to establish the causal connection. The court rejected that position, finding it would be inconsistent with the policy’s use of the phrase “actual or alleged” in its definition of wrongful acts.

“The Court finds that these allegations are causally connected by reason of a series of common facts, circumstances, situations, transactions, or events,” Tse wrote

The court also examined the allegations in the underlying AME Church retirement plan lawsuit.

Among the allegations, plaintiffs claim Newport misreported the value of investments in Motorskill Ventures Inc., Motorskill Ventures I LP and Motorskill Asia Ventures I LP. According to the complaint, the Motorskill entities benefited from more than $36 million in plan assets between 2005 and 2016.

Newport initially issued earnings reports concerning the Motorskill investments based on written statements that did not support the reported valuations, court documents say. Beginning in 2019, Newport allegedly continued issuing earnings reports without written statements supporting the valuations.

Newport argued that its conduct before and after Aug. 31, 2018, was not sufficiently connected to trigger the prior acts exclusion.

On this point, Tse again sided with the insurers.

As a result, the court determined that Newport’s pre-Aug. 31, 2018, and post-Aug. 31, 2018, conduct constituted interrelated wrongful acts under the policy.

The prior acts exclusion therefore bars coverage, the court ruled.

Additional rulings sought

Newport had asked the court to rule on two additional issues involving the underlying litigation.

The company sought a ruling that the insurers had waived their right to challenge the reasonableness of the settlement amount and terms and that the settlement was reasonable as a matter of law. Newport also sought a ruling concerning application of the “larger settlement rule” to an allocation dispute.

Because the court found that the prior acts exclusion barred coverage, it did not address either issue.

The decision stems from the broader litigation over the AME Church Ministerial Retirement Annuity Plan, in which participants alleged that Newport and other defendants participated in a decades-long scheme that mismanaged retirement assets and enriched certain individuals at the expense of plan participants.

The underlying plaintiffs settled with AME Church and several church-related defendants for $20 million in 2024. A subsequent mediation produced a proposal for Newport to resolve its potential exposure for $40 million.

Newport and the insurers later litigated whether insurance coverage was available for that settlement.

The ruling leaves the insurers’ summary judgment motion granted and Newport’s partial summary judgment motion denied.

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