Diocese with Few Assets in Bankruptcy Battle

By Olivier Uyttebrouck
Albuquerque Journal
August 14, 2015

The Diocese of Gallup’s assets are “virtually non-existent” and insurance coverage is “extremely limited” for settling the diocese’s Chapter 11 bankruptcy case, an attorney for an insurance company said in court records.

At least 17 of the 57 sexual abuse claims filed in the case predate 1965, when the Diocese of Gallup had no insurance coverage, attorneys said in motions.

The company that insured the diocese from 1965 to 1977, Home Insurance Co., is insolvent and went into liquidation proceedings in 2003.

The 25 sexual abuse claims that date to that period are now covered by New Mexico Property and Casualty Guaranty Association, which was created by New Mexico state law in 1978 to cover insurance policies issued by defunct companies.

But by state law, claims against the Guaranty Association are capped at $100,000 each, said John Franchini, the state’s insurance superintendant.

Meanwhile, legal and professional costs in the bankruptcy case have mounted to more than $2.6 million through June 30, court records show.

Attorneys representing the 57 alleged victims of sexual abuse by clergy have asked U.S. Bankruptcy Court Judge David T. Thuma to allow trials to proceed in three civil abuse cases. The cases were filed in Arizona state courts before the diocese filed for bankruptcy in 2013.

Attorneys requested the trials after court-ordered mediation talks broke down in June.

Thuma has scheduled a hearing today in Albuquerque to consider the requests.

James Stang, a Los Angeles attorney who represents 57 alleged victims, said the trials “will provide valuations of abuse cases” and force the diocese and its insurance companies to offer “reasonable” payments to victims.

But attorneys representing the diocese and insurance companies have urged Thuma to reject the request, alleging that Stang is seeking the trials as a way of “gaining tactical advantage” should mediation talks resume.

The trials would use “already desperately short resources simply to try three claims that are either totally uninsured, or substantially underinsured,” wrote Victor Ortega, an attorney for Catholic Mutual, which insured the diocese from 1970 to 1990.








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