Judge Rules Archdiocese’s Insurance Not Liable for Fraud-based Claims

By Marie Rohde
Milwaukee Journal Sentinel

August 15, 2008

The Archdiocese of Milwaukee will be solely responsible for paying any potential settlements or judgments in at least four lawsuits involving clergy sexual abuse because its insurance policies don’t cover intentional acts such as fraud, a judge ruled Thursday.

Milwaukee County Circuit Judge Jean DiMotto made no findings about whether the archdiocese committed fraud in moving abusive priests without notifying new parishioners of prior allegations, which is the claim underlying the lawsuits.

Around the country, insurers have generally paid 50% or more of multimillion-dollar settlements or judgments in clergy sex abuse cases, most of them based on negligence claims.

John Rothstein, a lawyer for the archdiocese, said he would consult with his client about a possible appeal of the decision or other possible actions.

An archdiocese spokeswoman said DiMotto’s ruling has no bearing on the merits of the litigation.

“This was a narrow procedural issue related to insurance coverage which comes up from time to time between insurers and insureds,” said Julie Wolf, assistant communications director. “In addition, it is not appropriate for us to comment on pending litigation or the ramifications of court decisions that have not yet been made.”

Jeffrey Anderson, a St. Paul lawyer who represents victims here and in several other states, said there are nine fraud-based clergy sex abuse cases pending in Milwaukee County and that he expects more will be filed. Bishops Accountability, a nonprofit that tracks settlements involving claims against the Catholic Church, estimates that $3 billion has been paid to victims since 1950; the U.S. Conference of Catholic Bishops reported various dioceses paid $615 million to victims last year.

In 2006, the Milwaukee Archdiocese agreed to pay $16.65 million to 10 California victims of abuse by Milwaukee priests who were moved to parishes there. Slightly less than half of the settlement was covered by insurance; the archdiocese announced that its portion would be covered by the sale of the Cousins Center in St. Francis, other archdiocesan properties and the liquidation of some long- and short-term investments. The archdiocese noted in that case that no parish property was affected by the settlement.

Until 2007, victims of sex assault in Wisconsin were unable to sue the Catholic Church because of a pair of mid-1990s state Supreme Court decisions. Last year, the court ruled the church could be sued for fraud in some cases but not for negligence.

Most of the local cases have been assigned to DiMotto, including four that involve the same two priests at the center of the California settlement, the late Siegfried Widera and Franklyn Becker, who has been removed from the priesthood.

Anderson, the plaintiffs’ attorney, argued that the church committed fraud by knowingly assigning priests with histories of sexual abuse in parishes without alerting parishioners — or, in some cases, other priests — to the potential danger.

Mark S. Nelson, a lawyer for the insurance company, argued that if such fraud was proven, it would constitute intentional acts that nullified insurance coverage.

DiMotto, assuming for the sake of the motions that the lawsuits claims were true, noted that Widera was placed in a parish after being convicted of sexual misconduct and the archdiocese went to lengths to keep the priest’s past a secret.

“Fraud by definition is intentional,” she said. “Why else would there be deception? We do not lie by accident.”

DiMotto said the insurance companies do not have an obligation to pay the claims against the church. She also said the insurance carriers do not have to cover the church’s legal fees after Thursday’s ruling but that coverage of fees incurred earlier in the case would be decided later.

In response to a question from David Muth, one of the church’s lawyers, DiMotto said that if the Supreme Court reverses itself and permits the church to be sued for negligence, then her decision on the insurance coverage would not apply.

Anderson told a reporter there could be another route for the church to be sued for negligence. The Legislature is considering a bill to permit a two-year window for victims to sue even for abuse committed decades earlier. He urged the church to drop its opposition to the bill.

“The archdiocese would benefit from it, and the children who were abused would benefit,” Anderson said.



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