The Church Won Its Age Discrimination Suit and Still Lost $61,000 of Coverage

9 min read · Last updated August 3, 2026

In this article

• Why the exception did not stop the lawsuit
• Function not title and why that is the expensive part
• The Title VII exemption is narrower than most boards assume
• What a won case does to a $1 million limit
• The claims made trigger nobody raises at renewal
• What to ask for before the next renewal
• Frequently asked questions

Ray Tanaka is the business administrator at a 240-member church outside Dayton, and in March 2025 the council voted not to renew the contract of its 58-year-old part-time office manager. She filed a charge with the Equal Employment Opportunity Commission, took her right-to-sue letter, and filed suit in November 2025 under the Age Discrimination in Employment Act. The church’s attorney raised the ministerial exception. Fourteen months after the charge, a federal judge granted the church summary judgment. Ray’s congregation won outright, and the win cost it $86,000.

Why the exception did not stop the lawsuit

Most boards hear “ministerial exception” and picture a door that stays closed. It is not that. In Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, the Supreme Court settled its procedural character in a footnote: “We conclude that the exception operates as an affirmative defense to an otherwise cognizable claim, not a jurisdictional bar.”

In plain terms, the claim is a real claim that a court has the power to hear. The exception is something the church raises in response. That single distinction is the whole cost structure of these cases. A jurisdictional bar can end a suit at the threshold on a short motion. An affirmative defense means somebody answers the complaint, briefs the motion, and usually produces evidence, testimony, and job records about what the employee actually did all day.

Function not title and why that is the expensive part

In 2020 the Court decided Our Lady of Guadalupe School v. Morrissey-Berru, consolidating the cases of two Catholic elementary school teachers. Agnes Morrissey-Berru sued under the Age Discrimination in Employment Act after her contract was not renewed. Kristen Biel alleged she was discharged after requesting a leave of absence to obtain breast cancer treatment. Neither woman held a title containing the word minister, and both had less formal religious training than the teacher in Hosanna-Tabor. Both were held to fall inside the exception anyway.

The reasoning is the sentence every religious employer should have on file. The Court put it in one sentence: “What matters, at bottom, is what an employee does.” Of the two teachers it wrote: “Their titles did not include the term ‘minister,’ and they had less formal religious training, but their core responsibilities as teachers of religion were essentially the same.”

Here is the part that costs money. The Court has twice refused to give lower courts a test to apply mechanically. Hosanna-Tabor said: “We are reluctant, however, to adopt a rigid formula for deciding when an employee qualifies as a minister.” Guadalupe confirmed it “did not announce ‘a rigid formula.'” No formula means no bright line. No bright line means a fact fight, and a fact fight means discovery.

Role on a small congregation’s payroll	Likely inside the ministerial exception	Why the answer is not the title
Senior pastor or rabbi or imam	Almost certainly yes	Teaches doctrine, leads worship, and personifies the faith. The clearest case there is.
Youth or religious-education director	Usually yes	Guadalupe rests on educating young people in the faith, which is this job description whether or not “minister” appears in it.
Music or worship director	Genuinely contested	Turns on whether the role selects and shapes worship content or simply performs. Courts have split, and the answer comes out of discovery.
Office manager or bookkeeper	Almost certainly no	No role in conveying the religious message. A pastoral-sounding title does not change the analysis.
Custodian or facilities staff	No	Fully subject to ordinary employment law, including wage and hour rules.

The Title VII exemption is narrower than most boards assume

There is a second protection, and it is frequently confused with the first. Title VII contains a statutory exemption for religious employers at 42 U.S.C. section 2000e-1(a). It reads, in relevant part, that the subchapter “shall not apply … to a religious corporation, association, educational institution, or society with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities.”

Read the operative words: individuals of a particular religion. The exemption is limited to one characteristic. A congregation may lawfully require that its staff share its faith. It does not thereby acquire permission to make decisions based on age, disability, race, sex, or national origin. The Americans with Disabilities Act contains parallel religious provisions at 42 U.S.C. section 12113(d), and they too are about religion.

So Ray’s office manager, who was not a ministerial employee, brought an age claim that neither the statutory exemption nor a quick motion could reach. Funding exactly that claim is what employment practices liability insurance for a small employer is for. What the policy does not do is make winning free.

What a won case does to a $1 million limit

Ray’s policy carried a $1,000,000 limit for each claim and in the aggregate, a $25,000 retention applying to defense costs and damages alike, and defense costs payable inside the limit. That third feature is standard on small-business forms and is the one nobody explains at the point of sale.

The arithmetic on his win: $86,000 of total defense, minus the $25,000 retention the church funded in cash, leaves $61,000 paid by the policy. Because defense erodes the limit, the aggregate available for the remainder of that policy year fell from $1,000,000 to $939,000. The church paid $25,000 out of the general fund and gave up $61,000 of protection, and there was never a settlement.

Policy structure	Congregation pays in cash	Paid by the policy	Aggregate limit left for the rest of the year
Defense inside the limit, $25,000 retention (Ray’s policy)	$25,000	$61,000	$939,000
Defense inside the limit, $50,000 retention	$50,000	$36,000	$964,000
Defense outside the limit, $25,000 retention	$25,000	$61,000	$1,000,000
No employment practices coverage at all	$86,000	$0	None

Notice which row is different. Moving defense outside the limit does not reduce what the congregation pays today. It preserves the full limit for the next claim, which matters most in a year when one governance dispute produces two claims. If your board asks a single coverage question, ask that one. The retention plus defense-within-limits structure is where small employers get surprised twice on the same file.

The claims made trigger nobody raises at renewal

Employment practices coverage is almost always written claims-made, so the policy that responds is the one in force when the claim is reported, not when the conduct happened. Every claims-made policy carries a retroactive date, and a congregation that switches carriers to save a few hundred dollars can have that date reset to the new inception without anyone flagging it. A complaint about a 2024 termination, reported in 2027, then has nothing behind it. The same tail coverage gap that follows a claims-made policy applies here, and employment allegations surface years late more often than most lines.

What to ask for before the next renewal

This is a good quarter to ask. The Council of Insurance Agents and Brokers put employment practices premium down 1.8% and directors and officers down 2.1% in its first-quarter 2026 survey, with the overall market at negative 1.2%, the first negative reading after 33 consecutive quarters of increases. Meanwhile the Ivans Index for the second quarter of 2026 put commercial property renewals up 6.40%, general liability up 5.44%, and umbrella up 7.96%. Ivans measures agency-placed small and mid-market renewals, which is precisely what a 240-member congregation is.

Read those two facts together. The lines that insure the buildings are rising and the lines that insure the board’s decisions are falling. That is where the negotiating room sits. Ask for defense outside the limits, ask for the retroactive date in writing, and ask whether the retention applies to defense as well as damages. Then check the property side separately, because a congregation carrying several structures on one blanket limit has a statement of values problem waiting.

Frequently asked questions

Does the ministerial exception mean a church cannot be sued by employees?

No. The Supreme Court held in Hosanna-Tabor that the exception is an affirmative defense to an otherwise cognizable claim rather than a jurisdictional bar. The employee can file, the court has power to hear the case, and the church raises the exception in its defense. Winning that defense still means paying to litigate it.

Who counts as a ministerial employee?

It depends on what the person actually does, not what the position is called. In Our Lady of Guadalupe School v. Morrissey-Berru the Court wrote that “What matters, at bottom, is what an employee does,” and twice declined to adopt a rigid formula. Clergy and religious-education staff are the clearest cases. Bookkeepers, office managers, and custodians generally are not.

Are religious organizations exempt from employment discrimination laws?

Only as to religion. The Title VII exemption at 42 U.S.C. section 2000e-1(a) covers “the employment of individuals of a particular religion.” Age, disability, race, sex, and national origin claims from a non-ministerial employee proceed on the merits.

Does employment practices insurance cover defense costs if the church wins?

Yes, and that is the point of buying it. On most small-employer forms those defense costs are paid inside the policy limit, so a win still reduces the coverage available for the next claim during that policy period. Ask whether your form pays defense inside or outside the limit before you renew.

Why is our employment practices premium falling while our property premium rises?

They are different markets. Broker survey data for the first quarter of 2026 showed employment practices premium down 1.8% and directors and officers down 2.1%, while renewal indices for small and mid-market accounts showed commercial property up 6.40% in the second quarter. Casualty and governance lines are moving in opposite directions right now.

Ray’s council approved the defense-outside-limits endorsement at the following renewal for a few hundred dollars more. The congregation had spent fourteen months and $86,000 learning that in this line of coverage, the bill for being right arrives either way.