Judge Oks 2 Insurance Settlements in Diocese of Duluth’s Bankruptcy

By Tom Olsen
Forum News Service
January 5, 2018

https://www.twincities.com/2018/01/05/judge-oks-2-insurance-settlements-in-diocese-of-duluths-bankruptcy/

A judge overseeing the Diocese of Duluth’s bankruptcy has signed off on two insurance company settlements that will pump nearly $10 million into the case.

The agreements, approved by U.S. Bankruptcy Judge Robert Kressel at a hearing in Minneapolis on Thursday, will provide almost $9 million to victims of child sexual abuse and allow officials to pursue additional compensation.

The settlements with Catholic Mutual Relief Society of America and Fireman’s Fund Insurance Co. resolve two-fifths of a federal lawsuit filed in June 2016 that has stalled the bankruptcy proceedings.

The diocese, which filed for Chapter 11 protection in December 2015 in the wake of a $4.9 million verdict, brought the suit against five insurers in an effort to force coverage of claims received from 125 people who said they were abused by priests.

Nebraska-based Catholic Mutual in November agreed to contribute $8.95 million to victims, becoming the first insurance company to resolve its role in the case after prolonged litigation and mediation.

Representatives of both the diocese and the victims said the settlement marked a “major step forward” in moving the bankruptcy case toward a global resolution that will adequately compensate victims and allow the diocese to emerge from Chapter 11 protection.

Fireman’s Fund, a defunct insurance company that has since been absorbed by German-based parent company Allianz, became the second to settle. Despite denying that it ever provided coverage to the diocese, the insurer agreed to contribute $975,000 to resolve its part in the suit in December.

That settlement differs in that the funds will not go directly to victims, but rather to the diocese for the purposes of continuing litigation against the three remaining insurance companies.

“The settlement payment to be made by Fireman’s Fund will assist the diocese in prosecuting the coverage litigation and thus monetizing that valuable asset, for the benefit of (victims),” diocese attorneys wrote in a motion urging approval of the agreement.

The abuse claims date as far back as the early 1940s, providing challenges for attorneys to sort through historical policies and determine each insurer’s obligations.

Liberty Mutual, Church Mutual and Continental have yet to settle their claims, and litigation is continuing in U.S. District Court. Those cases have to be resolved before a final reorganization plan can be accepted by the court.

Josh Peck, an attorney representing many of the victims through St. Paul law firm Jeff Anderson and Associates, told the Forum News Service in November that the first settlement marked a major milestone in the case, but stressed there’s “still a lot of work to do.”

“We don’t want to hurry and get a plan that isn’t fair,” he said. “It does take a long time and it can be frustrating. But to get the best results, it’s going to take some time.”