An Illinois appellate court upheld the decision to pause National Surety Corp.’s lawsuit, which claimed it held no duty to cover sexual abuse allegations against the Boy Scouts of America. The court based its decision on the BSA’s ongoing federal litigation and bankruptcy proceedings.
On March 24, 2025, the Illinois Appellate Court, First District, affirmed a circuit court’s decision to stay proceedings in a case involving National Surety Corporation, Allianz, and the Boy Scouts of America (BSA).
The case centers on insurance coverage disputes stemming from over 82,000 sexual abuse claims filed against the BSA.
The litigation began in 2012 when 18 former Scouts sued BSA, alleging abuse by a Chicago-area leader. National Surety then filed suit seeking a declaration that it had no duty to provide coverage under excess insurance policies.
Allianz, another BSA insurer, later filed counterclaims against BSA and other insurers. Parallel proceedings began in Texas, where BSA has its headquarters.
As claims grew, BSA filed for Chapter 11 bankruptcy in 2020. Its reorganization plan created a Victims Compensation Trust.
All insurance rights were assigned to a Trustee, who became the sole entity authorized to pursue recovery. Claimants submitted claims to the Trustee, not BSA. A federal court confirmed the bankruptcy plan in 2022, but that decision is under appeal in the Third Circuit.
Before the automatic bankruptcy stay lifted, the Trustee sued nearly 90 insurers, including National Surety and Allianz, in federal court in Texas, seeking coverage across over 3,000 policies.
The Illinois case, still at the pleading stage, was paused when the circuit court stayed proceedings on its own initiative (sua sponte). The circuit court instructed the parties to schedule a status update within 14 days of the Third Circuit ruling.
National Surety and Allianz argued the circuit court erred by staying the case without first ruling on their motions to amend.
They also challenged the stay’s validity, claiming the Trustee did not meet the legal threshold. The appellate court disagreed, noting the circuit court acted within its discretion and retained control of its docket.
The appellate court confirmed that the Illinois and Texas federal cases involve the same parties and causes. It upheld the circuit court’s reasoning based on the Kellerman factors: avoiding duplication, risk of conflicting rulings, potential for full relief in Texas, and respect for related federal litigation.
The circuit court also found Texas had a stronger connection, as BSA has operated from Texas since 1978 and most insurance policies were issued there.
The court emphasized that the stay was not based on any party’s motion, but rather due to pending appeals and procedural uncertainties in federal court.
Even if motions to amend were granted, the appellate court found the stay remained appropriate, especially given unresolved issues from bankruptcy proceedings.
Ultimately, the appellate court concluded the circuit court did not act arbitrarily or unreasonably. It rejected claims of procedural error and affirmed the stay without requiring full consideration of every Kellerman factor. The judgment was unanimously supported by Justices Hyman, C.A. Walker, and Gamrath.
