Court Ruling Leaves Fairbanks Diocese without Insurance in Abuse Cases

By Mary Beth Smetzer
October 3, 2009

FAIRBANKS — A federal bankruptcy judge has ruled that Continental Insurance Company is not liable for alleged sexual abuse claims against the Fairbanks Catholic Diocese spanning more than five years during the 1970s.

In a memorandum issued Sept. 11, U.S. Bankruptcy Court Judge Donald MacDonald IV stated that “some sort of policy” was issued to the diocese by CIC during the time in question, but the diocese was unable to produce sufficient evidence or the existence of terms and conditions of liability coverage between Oct. 14, 1973, and April 15, 1979, when some of the alleged claims of sexual abuse took place.

The diocese’s lawyers claim the northern Alaska diocese had a liability policy that mirrored the coverage of the Anchorage and Juneau dioceses but they were unable to produce originals or copies of insurance policies issued by CIC.

Kasey Nye, a Tuscon attorney representing the diocese, said the judgment is a no-win for either side.

“It’s bad news for the diocese and worse news for the claimants,” he said.

Since 2003, nearly 300 civil suits have been filed against the Fairbanks Catholic diocese, also known as Catholic Bishop of Northern Alaska, alleging sexual abuse of children by religious staff and volunteers.

Some of the claims go back 50 years or more.

Settlement negotiations have been ongoing for years without conclusion.

On March 1, 2008, the diocese declared Chapter 11 bankruptcy and all proceedings are now being overseen in the U.S. Federal Bankruptcy Court in Anchorage.

James Stang, attorney for the creditors committee which represents 292 alleged clerical sexual abuse victims, also was disappointed with the insurance judgment, since it means less money for the victims.

“We’re disappointed the court ruled the way it did. We think there was sufficient information for a trial. We hope the diocese will appeal it.”

Nye said the diocese will possibly appeal the decision but that could change if a settlement can be made with CIC.

In the meantime, the diocese’s lawyers first must deal with some legal proceedings which include preparing for a damages trial in mid-October regarding reimbursing CIC for legal expenses.

And at the request of the court, the diocese’s attorneys also are preparing an amended plan of reorganization and an amended disclosure statement.

“The goal is to have a reorganization plan in place and approved by the first of the year,” Nye said.

The Tuscon, Ariz. attorney, estimates the loss of the CIC liability coverage affected by the judgment is between $8 million to $12 million, but added that not all is lost in the insurance front. Other insurance and umbrella policies come into play that will support post abuse injury claims, Nye said.

In another development relating to the ongoing bankruptcy proceedings, Fairbanks Catholic Diocese Bishop Donald Kettler is calling some recent allegations that the diocese fraudulently attempted to shield $3 million in a trust for parishes as “false, misleading and exaggerated.”

In a Friday press release, the Bishop stated that the creation of the Catholic Trust of Northern Alaska in September 2007 “was neither fraudulent nor conducted in secret; rather, it was a legitimate, fully transparent activity.”

Kettler stated the trust money represent donations made by parishioners from the northern diocese’s 46 parishes and other Catholic institutions in Alaska and have historically been deposited with the diocese and used for practical expenses such as snow removal, plumbing problems, repairs, and even donuts.

“Prior to the formation of the trust,” Kettler stated, “the parish’s deposits had always been segregated and invested separately from the diocese’s funds, and were always accounted for as funds held in trust. There is a long history of bookkeeping to prove this.”

Kettler claims that creating the parish trust “merely acknowledged in legal form a long standing practice” and is legal under Alaska law, church law and diocesan policy.

Kettler emphasized that he deplores and denounces any action by volunteers, employees, religious and clergy of the church that led to suffering.

“I initiated this reorganization process as a way to move the Diocese towards reconciliation and healing,” he stated. “I still believe that is possible.

“I look forward to the day our reorganization plan is confirmed and we can focus on restoring faith, trust and hope to all the people of the diocese.”


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