Archdiocese sues insurance companies over sexual abuse coverage

Santa Fe New Mexican

February 24, 2022

By Rick Ruggles

The Archdiocese of Santa Fe, in the throes of Chapter 11 bankruptcy, sued four insurance companies this week, claiming they haven’t fulfilled their contracts to provide liability coverage for sexual abuse complaints.

The archdiocese hopes to raise enough money, including through insurance payouts, to settle the bankruptcy case involving more than 400 people who allege they were victims of clergy sexual abuse, with some claims dating back decades.

At least one attorney sees the archdiocese’s lawsuit as a step toward a resolution in the case, which has stretched over more than three years and is on its third mediator. While it was clear the archdiocese and its insurance companies haven’t reached deals on payouts, the lawsuit reveals the severity of the disagreements between them.

The defendants named in the suit are Great American Insurance Co., Arrowood Indemnity Co., St. Paul Fire and Marine Insurance Co. and United States Fire Insurance Co. Representatives of three of those companies couldn’t be reached for comment Thursday, nor could three of the attorneys representing the archdiocese.

A man in the legal department of United States Fire Insurance Co. said his company doesn’t comment on pending litigation.

The suit seeks a declaratory judgment from U.S. Bankruptcy Judge David Thuma, which generally outlines the rights and obligations of the parties in a contract. The suit says this would “terminate or significantly reduce the existing controversy between the parties.”

Aaron Boland, a Santa Fe attorney who represents one of the accusers, said the lawsuit will “open the door for the real conflict to be in view.” Boland said he sees it as a positive step.

The lawsuit “pulls back the curtain” on the case, he said. “The hope is this will move things toward justice.”

Earlier this month, Thuma rejected the archdiocese’s request to seal court filings involving “confidential insurance documents” from public view.

The archdiocese and its attorneys wrote in the lawsuit against insurers they had hoped for an order from the judge allowing them to “file this Complaint under seal.” After some of the accusers’ attorneys objected, the archdiocese and insurers backed off the request and Thuma ruled against sealing the documents.

Boland said he was delighted Thuma didn’t allow the records to be sealed. “It’s nice to see that the rules of the public courthouse apply to the church,” he said.

He added he hoped “the transparency will lead to pressure” on the archdiocese and the insurance companies.

The complaint accuses the insurers of “failure to honor contractual commitments to provide liability coverage to the Archdiocese for claims alleging decades-old sexual abuse.”

The archdiocese has been raising money — through property sales, property auctions and contributions — to settle with people claiming abuse, though the amount of funding it would need to settle the case has not been specified.

Insurance payouts also are expected to fund a large chunk of the settlement.

The lawsuit says in the 1990s, the archdiocese sought coverage for sexual abuse claims from insurers that had sold liability to the Catholic organization between February 1953 and April 1986, and they reached a series of agreements.

Some settlements released certain insurers from continuing insurance obligations, the suit says, but agreements with the insurers named as defendants in the complaint didn’t free them of all liability.

Those agreements and coverage “remain in force to this day,” the suit says, and the insurers have “ongoing obligations to provide insurance coverage for present and future sexual abuse claims.”

The insurers “have not fulfilled their contractual obligations to provide insurance coverage for the sexual abuse claims, nor have they accepted or acknowledged their obligations,” the document says, adding their actions “have impeded and obstructed” the archdiocese’s ability to reach a resolution in the bankruptcy.

Boland said the suit might provide a helpful nudge.

“The church is asking the court for help and saying, ‘Our insurance company isn’t paying us.’ I would like to think it’s a good sign,” he said.