Facing Hundreds of Abuse Claims, Boy Scouts of America Files for Bankruptcy

By | February 18, 2020

The Boy Scouts of America said on Tuesday it had filed for Chapter 11 bankruptcy amid a flood of lawsuits over allegations of child sexual abuse stretching back decades.

The bankruptcy is not expected to affect the organization’s programs, which promote self-reliance through outdoor activities such as hiking and camping. The group was already struggling with declining membership and controversy over admitting gay and female members.

The Boy Scouts, based in Irving, Texas, has said that it sincerely apologizes to anyone harmed, that it believes the accusers and that it encourages victims to come forward.

Founded in 1910, the organization has been overwhelmed by hundreds of claims after several states, including New York, removed legal hurdles that had barred people from suing over old allegations of child sex abuse.

Boy Scouts Insurance

Excerpts on insurance from Boy Scouts of America’s bankruptcy filing documents:

The BSA has historically procured commercial, general-liability insurance (CGL) policies from multiple insurers to protect itself from a myriad of risks, including claims of sexual abuse or sexual misconduct. These policies date back to 1962 and over time came to include both primary and excess insurance coverage that provide substantial limits of liability in many years… BSA’s insurance coverage has varied over time with traditional insurance in some years and fronting policies in other years. Also, while the amount of coverage remains substantial in many years, the insolvency of certain insurers and the resolution of sexual-abuse and other claims have either eroded, eliminated, or exhausted the liability limits for certain policies. In some instances, the availability of certain insurance policies remains contingent upon the resolution of active pending litigation between the BSA and some of its insurers. Nonetheless, with respect to most (if not all) policy years, at least some level of coverage under the CGL policies is available for bodily injury claims, including claims arising out of sexual abuse and sexual misconduct.

Overview of the BSA’s Insurance Program: The type of coverage provided for by the BSA’s insurance program has varied over the last six decades. Between 1962 and 1982, the BSA acquired insurance policies where each claim of bodily injury allowed the BSA to access the limits of liability under the applicable insurance policies. These are more commonly referred to as “per-occurrence” policies. Beginning in 1983, the BSA shifted its insurance program to policies that contained overall aggregate limits of liability. The BSA purchased these types of policies from 1983 to the end of 1985. As a counterbalance to the imposition of aggregate limits, the BSA’s towers of insurance in 1983 through 1985 included significant limits of liability and excess layers of coverage. The BSA substantially altered its insurance program beginning in 1986 and through 2018, procuring primary insurance and excess policies where the deductible matches the policy’s limit of liability. These policies are more commonly referred to as “fronting” policies. In addition, beginning in late-1990, the BSA procured significant insurance with limits of liability exceeding $100 million. In 2019, moreover, the BSA reverted to traditional insurance and expects to continue with such insurance in 2020.

The BSA’s Insurance Coverage for the Local Councils and Chartered Organizations: For decades, the BSA has undertaken and committed to procuring general liability insurance coverage for Local Councils and volunteers. Starting around 1971, the BSA began adding certain Local Councils as additional insureds under its CGL policies. Then, in 1978, the BSA formalized this practice through the implementation of a General Liability Insurance Program (GLIP), whereby the BSA agreed to procure general liability insurance for all Local Councils by including them in the definition of “Named Insured” in all of the BSA CGL policies. Similarly, starting in 1978, the BSA began to provide insurance coverage under its CGL policies to certain Chartered Organizations.

The changes to the law coincided with the #MeToo movement and a shift in public opinion that has been more supportive of accusers. The result has been a wave of lawsuits against church leaders, doctors and schools, as well as scouting.

The Boy Scouts has said in a statement that “we can live up to our social and moral responsibility to fairly compensate victims” while “also ensuring that we carry out our mission to serve youth, families and local communities through our programs.”

Paul Mones, who represents hundreds of men who claim they were abused as scouts, told Reuters: “The bankruptcy is being filed as a result of decades of concealing abuse by the Boy Scouts and their adult leaders.”

The bankruptcy, filed in Delaware, will allow the Boy Scouts to bring all of the lawsuits into one court and try to negotiate a settlement, rather than using the organization’s funds to fight each case in court, which might leave some victims with nothing.

A similar bankruptcy strategy to resolve sex abuse lawsuits has been used by more than 20 Catholic dioceses and USA Gymnastics.

It could, however, be challenging to determine the value of the Boy Scouts’ assets. The national organization said in its most recent annual report from 2018 that it had $1.5 billion. But hundreds of local councils have their own assets, and victims may try to make those available for settling claims.

Membership in the organization’s Cub Scouts and Boy Scouts fell 13% at the end of 2018 from the end of 2012, according to its annual report.

The Boy Scouts lost a major source of support when the Mormon church said it would no longer sponsor scouting troops, beginning in 2020. The move by the Utah-based Church of Jesus Christ of Latter-day Saints came shortly after the Boy Scouts said it would drop “boy” from its program for older youths and after saying it would admit transgender scouts.

The church said its decision was not influenced by the Boy Scouts’ changes, but by a desire to focus on its own youth programs.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder, Dan Grebler and Gerry Doyle)

Was this article valuable?

Here are more articles you may enjoy.