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  Insurer Key Partner in Church Settlement

By Paul A. Long
The Cincinnati Post [Covington KY]
July 14, 2005

The Diocese of Covington's demand that its insurance carrier pay at least two-thirds of its $120 million settlement with victims of priest sexual abuse is in line with other settlements around the United States, according to lawyers familiar with the issue and a review of other agreements.

But the diocese's decision to sue for that money is unusual, although not unprecedented.

The $120 million proposed settlement of a class-action lawsuit against the diocese calls for at least $80 million to come from insurance companies that have covered the diocese over the past 50 years.

Although that includes several companies, the main one appears to be Catholic Mutual Group, which has its headquarters in Omaha, Neb.

The company - a self-insurance fund that is part of the Catholic Church - has said it was not invited to the negotiations where a final settlement was reached.

But both the Covington Diocese and those who have sued it dispute that, saying the company refused to participate and arbitrarily said it would deny or limit coverage.

Because of that dispute, the diocese has sued the firm, and those who sued the diocese have joined in the lawsuit.

That lawsuit is in its early stages in U.S. District Court in Covington. Catholic Mutual has not filed its formal response to the lawsuit, although it is in the process of doing so, said its general counsel, Richard Novak.

He declined further comment.

"That matter is in litigation," he said. "We're not going to be discussing that in the media."

Catholic Mutual has participated in previous settlement talks. Angela Ford, a Lexington attorney who settled 27 cases against the dioceses of Lexington and Covington for $5.2 million, said a representative of the company was intimately involved in the discussions.

The insurance, which paid $3.23 million on the claims, Ford said, was instrumental in reaching an agreement.

"At the time we were negotiating, (the diocese) made it clear that we were approaching what they could award my clients," she said.

Having insurance "allowed them to increase the amounts of the financial awards to each person," she said.

She said Catholic Mutual was specific about what claims it would pay - those for which the diocese had legitimate coverage, and for which no compelling legal argument could be made against.

The church agreed to pay the rest of the claims, Ford said.

Barbara Bonar, a Covington attorney who has settled about a dozen claims against the diocese, said whether insurance would cover the agreement played a major role in how much the diocese was willing to pay.

But that's the case in almost any lawsuit involving liability, she said.

But Bonar said she doesn't know how much of her clients' settlement money came from insurance and how much was paid directly by the diocese.

"I was never told that," she said. "It really didn't matter to myself or my client."

Catholic Mutual was founded in 1899 by a group of bishops who could not find insurance elsewhere.

Currently, it says, it has policies with 111 of the 195 dioceses in the country, along with 14 dioceses in Canada.

It also covers 250 religious orders and Catholic-run organizations such as schools, nursing homes, counseling centers, and social programs, according to information on its Web site.

On its Web site, Catholic Mutual says the amounts it collects in premiums are "being accumulated and used to pay claims." It says it is "backed by recognized financial organizations with assets in excess of $75 billion."

Attorneys estimate it has paid out millions of dollars in settlements in the past few years, and may be on the hook for millions more. A recent report said dioceses in the United States have paid more than $1 billion in settlements, and the final total could reach two to three times that amount.

It's impossible to tell how much of that Catholic Mutual has paid. As a privately run organization, it does not have to release its financial statements. And Novak, its attorney, declined to discuss who it has covered and what sums it has paid out.

But reports of other settlements show that insurance companies - not always identified - have been a major source of payments for those abused by Catholic priests or employees.

In Tucson, Ariz. - where the diocese is one of three in the nation to have filed bankruptcy - the court approved a $22 million settlement. Of that, $14.8 million came from insurance. The diocese auctioned off $5.5 million in real estate to help pay its share.

In San Francisco, insurance paid two-thirds of a $21 million settlement. In a second settlement costing $16 million, a breakdown was not announced, although the diocese said its costs were in the millions.

In Sioux City, Iowa, the diocese announced an $805,000 settlement, and said insurance paid 60 percent of that.

In Orange County, Calif., the nation's second largest settlement was worth $100 million, with the diocese and its insurance companies splitting the cost equally.

In Manchester, N.H., the diocese paid $20 million to settle claims of sexual abuse. Half of that came from an outside insurance company, and half came from the Diocese of Manchester's own self-insurance fund.

"What we are seeing nationally is that about two-thirds is covered by insurance companies," said Patrick Noaker, a St. Paul, Minn., attorney who, along with partner Jeff Anderson, has sued dioceses across the country on behalf of more than 1,000 clients.

Some dioceses, however, have had to pay the bulk of the costs without insurance.

The Archdiocese of Boston, for instance, settled its cases for $85 million.

But after suing its insurance company, Lumbermens Mutual Casualty Company, for $59 million, the archdiocese eventually settled for $20 million.

To pay the rest, the archdiocese - one of the nation's largest, with more than 2 million Catholics - began to close parishes and claim their assets, and sell off other church property. The move has caused an outcry in the city, with some parish councils threatening to sue and others refusing to move out.

Last month, the Diocese of Springfield, Ill., sued nine of its insurance carriers, seeking a court judgment on whether they are responsible for settlements it negotiated. The diocese had paid out $7.7 million to settle 46 claims, and has another 30 claims outstanding.

Other dioceses also have sold off church or parish property, or cut staff to pay victims of sexual abuse.

In Covington, the diocese has said it will sell the Marydale retreat center in Erlanger to help pay for its share of $40 million.

The agreement between the diocese and those in the class-action lawsuit calls for the first $80 million in payments to be made from insurance. Only if more money is needed to pay claims should the diocese's share kick in, according to the agreement.

Insurance plays a larger role that dioceses would like people to believe, said the head of an organization of those who have been abused by priests.

David Clohessy, the St. Louis-based executive director of the Survivors Network of those Abused by Priests, or SNAP, said dioceses often have a half-dozen or more instance carriers.

"I don't know of any diocese that has only one insurance company," he said.

"Insurance is involved in virtually all of the settlements. Church leaders minimize and downplay the insurance angle. That's why we get so frustrated when church leaders cry poverty and say they have to sell church property."