Insurance Costs Soar for Diocese

By Bill Zajac
Republican [Springfield MA]
January 3, 2004

SPRINGFIELD - Insurance costs have risen 171 percent in the past four years for the Roman Catholic Diocese of Springfield, but church officials say little of it is attributable to the clergy sexual abuse crisis.

In a recent two-page letter to priests, diocesan comptroller William F. LaBroad said parishes will face steep increases in insurance costs as a result of insurance industry market conditions, a revaluation of diocesan properties for insurance purposes and two substantial claim settlements.

Those and other factors contributed to the diocese's insurance bill rising from $1.5 million to $4.1 million between fiscal years 2000 and 2004. Sexual misconduct coverage increased from $39,715 to $80,000, according to the letter.

The two claim settlements - from fires in 1999 at Perpetual Help Church in Holyoke and in 2000 at St. Joseph's School in Springfield - had a major impact on the bill.

The Perpetual Help fire, which destroyed a 3.5-acre city block, was caused by two youths who started a fire on a porch of the vacant Ferguson Place Apartments, firefighters said at the time.

In the St. Joseph's School blaze, where two firefighters were injured, police suspected arson by a student, who was not charged because of lack of evidence. At the time, the building was rented by North Star Academy Charter School, which has since closed.

The diocese received almost $23 million from insurers for the two fires. During the settlement process, diocesan insurers realized their property appraisals undervalued true replacement costs. Consequently, valuations were corrected during the past 18 months, raising premiums.

"That increase is completely in the realm of possibility," said Robert P. Hartwig, senior vice president and chief economist for the New York-based Insurance Information Institute.

"Four years ago we were at the bottom of the pricing ladder, and then prices started rising and have continued to rise. We went from a soft market to a hard one," Hartwig said.

"Liability, or what we call casualty insurance, in particular, rose at a rapid rate. 2004 renewals are seeing a 10-15 percent increase, which is down from the 30-40 percent annual increases we had seen," Hartwig said.

The Rev. John G. Lessard-Thibodeau, pastor of Our Lady of Guadalupe in Holyoke, said he wasn't thrilled about continued increases in insurance, but understands the value of it.

His parish, which included Perpetual Help, got $5 million for renovations and restoration and a $1 million maintenance endowment from the $18 million Perpetual Help settlement.

"We are not a wealthy parish, but we have very generous members," Lessard-Thibodeau said. He anticipates meeting with his Parish Council's finance committee to discuss it and then addressing it in the parish bulletin.

The diocese will conduct a series of meetings this month where parish representatives can meet diocesan officials, insurance company representatives and the engineer who helped the diocese with property revaluation.

The meetings could lead to parish discussions about the future of their properties, according to LaBroad and diocesan financial council executive secretary John H. Shuman.

A parish may have a vacant school building it has been unable to lease, Shuman and LaBroad said. Maybe the parish can't afford insurance for replacement cost, weighing a decision between insuring its fair market value and demolition.

Similar decisions could be made about rectories built for five or six priests that now have only one living in them.

Decisions on properties will also be made as regions within the diocese consider yoking, merging and closing parishes in the face of a continually shrinking priest population.

St. Patrick Parish in Chicopee, which includes a school, experienced a 62 percent increase in insurance costs this fiscal year. The increase will be offset in part by school-related fund raising through bingo games.

Its church was revalued from $1.5 million to $3 million, and its school's value also doubled, from $2 million to $4 million, according to parish business manager Katherine T. Mitchell.

The parish decided to pay all its insurance cost increase this year and not participate in a diocesan program in which parishes can phase in increases over three years, Mitchell said.

Besides property and liability insurance, the diocesan insurance bill includes workers compensation and auto insurance. Hartwig said increases in workers compensation rates have been driven by medical costs.

Until now, the diocese has not passed to parishes the full impact of insurance cost increases. "We have averaged 43 percent increases over the past four years. We have only billed parishes for 20 percent increases," Shuman said. Parishes have been helped by the diocese from returns on diocesan investments.

Also, the letter states, the diocese can no longer help parishes through an insurance reserve fund.

"I don't think these increases will be easy to absorb, but we will do what we have to do," said the Rev. Roy H. Duquette, pastor of Our Lady of the Annunciation Parish in Florence.


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