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Insurers tied to diocese options

Bankruptcy seen to push firms on abuse claims

By Stephen Kurkjian and Walter V. Robinson, Globe Staff, 12/3/2002

The dispute between lawyers for more than 400 victims of alleged clergy sexual abuse and the Boston Archdiocese over whether the church intends to file for bankruptcy turned yesterday to the crucial issue of how much insurance would be available to pay the claims.

Church records show that it has about $90 million in insurance coverage available to pay for claims of abuse alleged to have occurred between 1977 and 1989. That sum comes close to the more than $100 million that victims' lawyers say is needed to settle all of the cases.

But the insurance money available could total much less than that. The archdiocese's two principal insurers have balked at honoring many claims, contending that church officials acted recklessly by allowing priests known or suspected of abuse to remain in positions that allowed them to prey on children.

The archdiocese has signaled its willingness to sue the insurance firms, Kemper and Travelers, to try to force them to pay the claims. But the need for such litigation may vanish if the archdiocese follows through on its preparations, first reported in Sunday's Globe, to file for bankruptcy.

That, legal specialists said, is because a bankruptcy court might be more inclined than state courts to back the church as it presses insurers to help pay the claims.

''The Bankruptcy Court has great interest in providing maximum funds possible to pay off creditors,'' said Thomas O. Bean, cochairman of the Boston Bar Association's committee on bankruptcy. ''It's no doubt one of the many reasons that the archdiocese may be considering the bankruptcy option.''

Herbert Weinberg, a bankruptcy specialist for 12 years, agreed. ''The [Bankruptcy] court is committed to equity, and it is difficult to see the equity in allowing insurance companies to back away from their financial obligations,'' Weinberg said.

Keith Anderson, a spokesman for Travelers, declined to comment, saying it was ''too soon to speculate'' on the effect a bankruptcy filing would have on the dispute between the archdiocese and the insurance companies. Representatives for Kemper could not be reached.

Jeffrey A. Newman, whose law firm, Greenberg Traurig, represents about half of the 450 plaintiffs, said he has concluded, after examining confidential church records, that Kemper has $25 million in insurance funds still available to cover claims between September 1977 and March 1983, and that Travelers had $65 million to pay for claims during the years that it insured the archdiocese, April 1983 through March 1989.

''I'm certain that the archdiocese would like to have as much of that money available to pay for claims,'' Newman said. ''The more insurance money it has to pay claims, the less it has to pay out of its own pocket.''

Whatever advantages a bankruptcy court proceeding might offer against the insurers, lawyers for the alleged abuse victims see risks that outweigh the benefits of a bankruptcy filing.

Newman threatened Sunday to walk away from ongoing settlement talks unless he received assurances from Wilson D. Rogers Jr., the archdiocese's principal lawyer, that the church would not file for bankruptcy while negotiations between both sides continued toward a settlement.

Newman said Rogers contacted him yesterday to say the request was a reasonable one but that he would have to check with archdiocesan officials before giving an answer.

''We need to know whether they intend to file for bankruptcy, or whether they will assure us that they will make an attempt over a reasonable period of time to try to settle these cases through the mediator,'' Newman said. ''If we cannot get the assurance we need, we've got no alternative but to walk away from negotiations because the time we're spending there could be better spent preparing our cases for trial.''

Rogers did not return a phone call. Paul L. Sugarman, the veteran Boston lawyer who is overseeing the negotiations, also did not return phone calls.

Other lawyers who have participated in settlement talks said they shared Newman's concern. ''I believe it would be a tremendous assistance to all the victims for [the archdiocese] to say they are delaying going into bankruptcy,'' said Alan L. Cantor of Boston, one of two attorneys who represent lawyers with five or fewer claims against the archdiocese in the settlement talks.

Attorney Stanley J. Spero of Cambridge said he believed that the bankruptcy issue was an empty threat by the archdiocese, to try to get victims to reduce the size of their claims.

Stephen Kurkjian can be reached at kurkjian@globe.com.

Walter V. Robinson can be reached at wrobinson@globe.com.

This story ran on page B1 of the Boston Globe on 12/3/2002.
© Copyright 2002 Globe Newspaper Company.


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