Bankruptcy judge dismisses insurer’s claim

ROCHESTER (NY)
Catholic Courier [Diocese of Rochester NY]

October 10, 2024

By Karen M. Franz

In an Oct. 7, 2024, decision and order, U.S. Bankruptcy Judge Paul R. Warren dismissed on its merits the Continental Insurance Company’s adversary proceeding against the Diocese of Rochester for breach of contract and denied the insurer’s application for an administrative expense claim.

Warren also ordered further in-person mediation among representatives of Continental, which also is known as CNA; members of the Official Committee of Unsecured Creditors, which represents abuse claimants; the committee’s counsel; and state court attorneys representing multiple abuse clients.

In a bench trial before Warren July 29-30, CNA argued that the diocese was legally bound by an unsigned proposal for a settlement agreement with CNA that the diocese had presented for court approval in May 2021, and that the diocese breached that agreement when it agreed to an alternative settlement with survivors that is incompatible with certain terms of the proposed CNA settlement.

Warren’s decision outlined numerous steps that would have been required before the proposed CNA settlement agreement would have become “effective.” After reviewing documentary and witness testimony and applying New York law, Warren held that “the unexecuted settlement agreement is not enforceable” and dismissed CNA’s adversary proceeding. Warren further found that, even if the proposed CNA settlement agreement had been effective, CNA had failed to prove that it suffered any damages as a result of the diocese’s actions.

Warren noted that the CNA lawsuit “does not advance … one inch” the diocesan bankruptcy case, now in its sixth year. He emphasized the importance of achieving a “consensual global settlement.”

“Both CNA and the state court attorneys representing the abuse victims need to reexamine the lines in the sand they have drawn and find a way to move toward a realistic framework for settlement,” Warren wrote in his ruling.

The judge discharged with gratitude mediators Judge Gregg W. Zive and Paul Van Osselaer and named two new mediators — retired Bankruptcy Judge Shelly C. Chapman and attorney Paul A. Finn — “to try to bring the abuse victims and CNA to a settlement.” He urged the parties “not to waste this opportunity to finally settle their differences.”

https://catholiccourier.com/articles/bankruptcy-judge-dismisses-insurers-claim/