Appeals start over Boy Scouts bankruptcy
WILMINGTON, Del. — An attorney for some insurance companies that could be liable for child sexual abuse claims against the Boy Scouts of America urged a judge Thursday to reverse a bankruptcy plan for the organization, arguing collusion with claimants’ lawyers to pressure insurers to enter into settlements.
Ted Boutros, an attorney representing non-settling insurers, said the reorganization plan was not proposed in good faith and improperly strips non-settling insurers of their rights to challenge the claims.
“We’re just asking for fairness,” Boutros told U.S. District Court Judge Richard Andrews, who began hearing two days of arguments in appeals by certain insurers and sexual abuse claimants.
In September, U.S. Bankruptcy Judge Laurie Selber Silverstein approved a $2.46 billion reorganization plan that would allow the Irvingbased Boy Scouts of America to continue operating
while compensating tens of thousands of men who say they were sexually abused as children while in Scouting.
More than 80,000 men have filed claims saying they were abused as children by troop leaders around the country. Plan opponents say the staggering number of claims suggests that the bankruptcy process was manipulated.
“We know huge swaths of them are not legitimate claims,” Boutros said, referring to a statement made by one of the BSA’S own experts. Boutros also noted that a plaintiffs’ attorney acknowledged that
some 58,000 claims probably could not be pursued in civil lawsuits because of the passage of time.
The BSA’S largest insurers negotiated settlements for a fraction of the billions of dollars in potential liability exposure they faced.
Other insurers, many of which provided excess coverage above the liability limits of the underlying primary policies, refused to settle.
They argue that the procedures for distributing funds from a proposed compensation trust would violate their contractual rights to contest claims, set a dangerous precedent for mass tort litigation, and result in inflated payments.
Glenn Kurtz, an attorney for the Boy Scouts, told Andrews that opponents have to prove that Silverstein committed “clear error” in approving the plan but that they are not challenging any of the factual findings she made.
Under the plan, which the BSA describes as a “carefully calibrated compromise,” the BSA would contribute less than 10 percent of the fund.
The local BSA councils, which run day-to-day operations for troops, offered to contribute at least $515 million in cash and property.
The bulk of the compensation fund would come from the BSA’S two largest insurers, Century Indemnity and The Hartford, which reached settlements calling for them to contribute $800 million and $787 million, respectively. Other insurers agreed to $69 million.
Insurers opposing the plan argue that the BSA is contractually obligated to assist them in investigating, defending and settling claims, as it did before the bankruptcy.