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Diocese, insurance company to settle

Firm will cover part of $85m abuse cost

The Roman Catholic Archdiocese of Boston has reached a settlement with one of its two major insurance carriers to cover a portion of the cost of the $85 million settlement with 541 victims of clergy sexual abuse, the archdiocese said yesterday.

The archdiocese declined to describe the size of its settlement with the Lumbermen's Mutual Casualty Co., but two people familiar with the terms of the deal put it at $20 million.

The archdiocese had sued Lumbermen's in US District Court in Massachusetts in March 2004, seeking to force the insurance company to pay an unspeci- fied portion of the settlement. The insurance company filed a counterclaim the next month, arguing that the archdiocese had been so negligent in its handling of abusive priests that it should reimburse Lumbermen's for everything the insurance company had already paid out.

Yesterday the two sides filed a stipulation in court, agreeing to dismiss the litigation.

The archdiocese is still in negotiations with another insurance company, Travelers, but that company is thought to have significantly less financial liability than Lumbermen's did, because about 80 percent of the alleged abuse incidents took place when Lumbermen's was the primary archdiocesan insurer.

The $20 million deal means that the archdiocese will have to shoulder the larger share of the cost of its October 2003 agreement with abuse victims.

The primary funding for the settlement, which was paid with borrowed money, is to come from last year's $99 million sale to Boston College of a 43-acre portion of the archdiocesan headquarters in Brighton.

Neither the archdiocese nor the insurance company would confirm or deny the amount of the Lumbermen's settlement, which was provided to the Globe by two individuals who would speak only on condition of anonymity. An archdiocesan spokeswoman said church officials would make the amount public in the near future, in keeping with the archdiocese's pledge of financial transparency.

A top church official expressed satisfaction that the case had been settled. The settlement was brokered by Paul A. Finn of Commonwealth Mediation and Conciliation Inc. Finn's company, based in Brockton, also mediated the 2003 settlement between the archdiocese and the abuse victims.

"We are pleased to have this matter resolved," stated the Rev.

John J. Connolly, a special assistant to Archbishop Sean P. O'Malley.

Then, referring to several dozen still outstanding claims from abuse victims, he said, "We are hopeful that, in the near future, we will be in a position to begin discussions about how to resolve pending cases."

A spokeswoman for Kemper Insurance Cos., headquartered in Long Grove, Ill., declined to discuss the settlement. Lumbermen's is an underwriting company that is a member of the Kemper group of insurance companies. Kemper has been facing financial problems for several years and largely stopped issuing new policies in 2003.

"We don't have any comment," said Kemper's spokeswoman, Linda Kingman. "As a standard practice, we don't comment on claim settlements."

Lumbermen's had issued insurance policies to the archdiocese between 1964 and 1983, according to court documents, and the archdiocese argued that its coverage for bodily injury meant that Lumbermen's should contribute to the cost of settling cases brought by abuse victims.

Lumbermen's had paid some money to the archdiocese over the years, including $2 million toward a $10 million settlement in 2002 with 86 victims of the Rev. John J. Geoghan, but the company argued last year that the archdiocese had exhausted its coverage.

In its legal papers, the archdiocese accused the insurance company of fraud, "intransigence, and deception" and ''10 years of coverage denials and misrepresentations."

The insurance company denied any misconduct and instead demanded that the archdiocese reimburse Lumbermen's for the amounts paid out by the company, saying that the archdiocese "persists in its attempts to evade true accountability, namely, enduring the consequences of its actions."

The insurer accused the archdiocese of protecting priests and preventing scandal and said archdiocesan leaders knew of the abuse but failed to inform law enforcement authorities or to take other steps to stop it.

Lumbermen's also said in its court filings that the archdiocese's "institutional acceptance of clergy sexual abuse" made it ineligible for insurance coverage.

Lumbermen's "has no liability to the RCAB [Roman Catholic Archdiocese of Boston] because damages in the underlying clergy sexual abuse claims were intended or expected, due to the RCAB's institutional acceptance of same," Lumbermen's said.

The settlement between the archdiocese and Lumbermen's marks the second time in his career that O'Malley has used legal action to force an insurance company to pay a portion of the costs of settling sexual abuse cases.

In 1992, when he was bishop of Fall River, O'Malley successfully sued two insurance companies that were balking at paying to settle cases involving abuse by a Fall River priest, the Rev. James R. Porter.

In each set of lawsuits, O'Malley has been represented by attorney Thomas H. Hannigan Jr. of Boston.

Michael Paulson can be reached at mpaulson@globe.com.

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