Attorneys Fear Church Insurers Could Tangle Southern California Settlements

Attorneys for both alleged victims and dioceses of the Roman Catholic Church in Southern California say they’re increasingly concerned that insurance companies could hold up settlements in nearly 700 lawsuits that accuse clergy of sexual molestation.
Plaintiffs attorneys and church officials say insurers are the main obstacle to settling nearly 100 Orange County claims, despite intense negotiations recently in the Diocese of Orange. Attorneys fear the same thing could happen in the Los Angeles archdiocese and the dioceses of San Diego and San Bernardino, where talks are not as far along.

“The carrier is essentially saying … you can’t settle these cases and if you settle these cases we’re going to argue that we’re not bound by any settlement you agree to,” said Ray Boucher, a plaintiffs’ attorney. “That’s the threat that’s being held over the head of Orange County and to a lesser extent over the head of Los Angeles.”

The role of insurers has been an important one throughout the U.S. clergy abuse crisis, now in its third year. The insurers often argue that by shielding employees accused of criminal activity, dioceses have breached their contract and are therefore not eligible for reimbursement. Many dioceses also have blamed insurers for defense tactics that victims have called unfair and hurtful; insurers choose the lawyers and require dioceses to aggressively defend themselves or forego coverage.

“The bottom line is insurance companies can sit back and do nothing and wait and see what happens,” said Donald Woods Jr., attorney for the Archdiocese of Los Angeles. “It really puts the archdiocese in a bind because, if we honestly want to settle with the victims, we have to front all the money and then go after the insurance companies.”

Attorneys for Travelers Casualty Surety Co., which is involved in the Orange County negotiations, did not return calls for comment from The Associated Press. Attorneys for Alliance, Firemen’s Fund and Pacific Indemnity, who are involved in the Los Angeles cases, declined comment and said it was unlikely any insurance attorney would comment because of a gag order on the case.

Insurance companies refused to reimburse the Archdiocese of Boston for part of an $85 million settlement in 2002, claiming it was negotiated without their consent. The archdiocese, which sued Lumbermens Mutual Casualty Co., has since sold the archbishop’s mansion and ordered the closing of 65 of its 357 parishes.

The Portland, Ore., archdiocese filed for bankruptcy in July in part because its insurers, claiming breach of contract, refused to cover claims that could have reached a combined $155 million at trial.

Just days after saying he canceled an important trip to a U.S. bishops conference in Denver last month because of a “window of opportunity” in talks, Bishop Tod Brown of the Diocese of Orange wrote an open letter to parishioners telling them it was unclear whether the insurers would contribute “at a meaningful level.”

The insurers’ position led some plaintiffs’ attorneys to suggest at a hearing this week that they should bring a handful of cases to trial in the hopes that the threat of a multimillion-dollar jury verdict will spark a settlement.

Late July 22 there was an apparent setback in settlement talks in Orange County and plaintiffs’ attorneys asked a judge to be allowed to begin the process of discovery, which is a step toward trial. There was no immediate decision.

However, insurers can also refuse to pay a jury verdict on the grounds the church breached its contract. In those cases, payment to victims can be tied up for years in trials within a trial, as the dioceses and insurers sue and countersue over liability.

Woods, the archdiocese attorney, said filing for bankruptcy as Portland did would be a last resort for the Los Angeles Archdiocese, but added: “It is a definite concern and certainly is a possibility.”

Attorneys Fear Church Insurers Could Tangle Southern California Settlements

More from Insurance Journal