Overview
The Diocese of Buffalo, New York, has reached a settlement under which insurers will contribute $177 mn to a fund for survivors of clergy sexual abuse. Combined with the diocese’s $150 mn contribution, the proposed compensation fund would total $327 mn.
The diocese has asked the U.S. Bankruptcy Court for the Western District of New York to approve the agreement. The settlement follows years of mediation involving the diocese and more than 20 insurers, including Continental, Employers and National Union, after the diocese filed for Chapter 11 bankruptcy six years ago.
The bankruptcy case was intended to reorganize the diocese’s finances while addressing sexual abuse claims. More than 920 claims have been filed alleging negligence connected with acts of child sexual abuse.
Many of those claims followed New York’s 2019 Child Victims Act, which changed the state’s statute of limitations and created a temporary period allowing survivors to file civil lawsuits previously barred by time limits. The original one-year period was later extended through Aug. 13, 2021.
Insurance coverage disputes complicate claims process
The disputed insurance coverage includes a shared program that provided primary and excess occurrence coverage for the diocese, parishes, schools and other related parties beginning in 1973. The diocese also maintained umbrella and excess liability policies.
The diocese and affiliated entities contend they purchased additional liability policies before 1973. Most copies of those earlier policies are missing, leaving the diocese dependent on secondary evidence to establish whether the coverage existed and what terms applied.
Insurers raised multiple coverage defenses during the bankruptcy process. They questioned both the diocese’s liability for individual claims and whether specific policies required insurers to pay those losses.
The diocese and the committee representing survivors disputed many of those arguments. Continued litigation would have required the parties to resolve questions over missing policies, coverage terms and the value of individual claims, potentially extending the bankruptcy process.
Diocese chose certainty over further litigation
The diocese said one factor behind the settlement was the likelihood that insurers would challenge whether some pre-1973 policies were ever issued. Even where such policies existed, insurers were expected to contest whether particular abuse claims fell within their coverage.
Another issue involved the composition of the claims pool. The diocese said a material number of claims involved allegations that insurers were likely to consider low-value or without value from an insurance recovery or legal liability standpoint.
Against that background, the diocese concluded that accepting the insurers’ proposed $177mn contribution provided more certainty than continuing litigation over coverage. It determined that the expected recovery outweighed the additional cost, delay and legal uncertainty associated with pursuing the insurance disputes.
The settlement is intended to resolve the outstanding insurance coverage issues between the parties. The survivors’ committee participated in the mediation and supports the agreement, according to the diocese.
Parishes responsible for $80 mn of church contribution
The diocese’s own contribution to the compensation fund totals $150 mn. More than 100 parishes within the diocese are responsible for $80 mn of that amount.
If approved by the bankruptcy court, the $177 mn insurance settlement would raise the total fund available for abuse claims to $327 mn and resolve one of the largest remaining financial disputes in the diocese’s Chapter 11 case.
