Insurers Agree to Pay Archdiocese Additional $2.3 Million

By Annysa Johnson
Milwaukee Journal Sentinel
December 19, 2014

http://www.jsonline.com/news/religion/insurers-agree-to-pay-archdiocese-additional-23-million-for-abuse-claims-b99411927z1-286378171.html

The Archdiocese of Milwaukee has reached an agreement with its insurance companies for an additional $2.3 million, bringing to $10.3 million the amount its insurers will pay to help the archdiocese emerge from its nearly 4-year-old bankruptcy.

Under the terms of a motion filed in the bankruptcy this week, half of the $10.3 million would go to pay administrative costs — primarily legal fees that have now topped $16 million. Half would go into a trust for 128 of the bankruptcy's creditors, men and women who were sexually abused by diocesan priests as children.

The settlement brings the amount available to those survivors to $5.15 million, from $4 million in the archdiocese's original plan of reorganization.

Victims and their attorneys blasted the settlement as inadequate and said they would object in court.

"All the insurance settlements here shut survivors out of the process and are taking money from survivors and putting it in the pockets of the bankruptcy attorneys," said Michael Finnegan, whose St. Paul, Minn., firm represents most of the 575 men and women who have filed claims in the bankruptcy alleging they were molested by priests and others connected to the church.

The archdiocese said the agreement is in the best interest of both victims and the bankruptcy estate, noting that it has unsuccessfully pursued its insurers for sex abuse claims in the courts for years, and insisting that it would likely lose any additional legal battles.

The latest settlement involves a so-called insurance buyback plan with Lloyd's of London, OneBeacon and Stonewall insurance companies. Under terms of the agreement, the insurers will pay the $10.3 million to the bankruptcy estate in return for agreements barring any future lawsuits by the archdiocese and a host of other Catholic entities, including parishes and schools. It includes the $8 million already agreed to by Lloyd's in a previously brokered settlement.

Victims and their supporters have objected to that proposed blanket of immunity, as well as the size of the settlements, saying the insurers face hundreds of millions of dollars in potential liability.

Milwaukee's was the eighth Catholic diocese to file for bankruptcy protection as a result of the sex abuse crisis when it entered Chapter 11 in January 2011, as several sex abuse lawsuits were moving toward trial.

Before filing for bankruptcy, the archdiocese spent $30 million on its sex abuse cases, including settlements, therapy and legal and audit fees.

Its inability to obtain insurance settlements for abuse stems from its success fighting victims in court. The archdiocese was successful in persuading the Wisconsin Supreme Court to bar negligent supervision lawsuits by victims, keeping victims out of the courts for a decade.

The Supreme Court reopened the door, allowing them to file fraud lawsuits. But the courts have consistently held that the insurers are not liable for fraud because it is an intentional, rather than accidental, act.