The Roman Catholic Diocese of Rochester last week filed an amended reorganization plan in its Chapter 11 bankruptcy, which is inching toward a final settlement with hundreds of survivors of decades-old sexual abuse by priests and other church officials.
The filing represents a significant move forward in the case. Plans of reorganization are a key step in resolving any Chapter 11.
The amended plan adds $51.75 million to the $75.6 million trust amount stated in the plan the diocese filed in March. The added amount reflects sums two insurers agreed to contribute months after the first plan was drafted. It also makes technical changes intended to head off insurance-company objections in how payments to survivors would be made.
There is a complication, however. The diocese plan will face off against a rival plan filed by the Continental Insurance Co.
Continental, known as CNA, is one of several liability carriers that the diocese has long made clear it expects to pay for much of any settlement that might be worked out. Whether CNA has standing to file its own plan is a question still to be decided by court.
At stake is how much and how soon compensation will be doled out to some 485 sexual abuse survivors who have so far waited four years to see the case resolved.
The diocese asked for court protection in September 2019, a month after the New York Child Victims Act took effect. The CVA opened a temporary window for victims of childhood sexual abuse to go after abusers, temporarily nullifying a statute of limitations that had protected abusers.
With the CVA in place, thousands of men and women across New York filed state court actions accusing Catholic dioceses around the state of allowing priests and other church officials to sexually abuse them as children. The Rochester diocese was first in the state to seek court protection. Several other dioceses have since followed. None have yet been resolved.
CNA is the only one of several insurers involved in the Rochester diocese bankruptcy that has refused to sign on to a settlement painfully worked out after years of court-ordered negotiations among the diocese, other insurers and a committee representing the interests of abuse survivors with claims in the bankruptcy.
While it is unusual for third parties like CNA to preempt debtors’ reorganization plans, it is not unheard of. The survivors committee has asked the court to disallow CNA’s plan.
Bankruptcy Judge Paul Warren has scheduled an Oct. 5 hearing to sort out the dispute.
The diocese plan calls for a trust to be created out of which survivors would be paid. The diocese and its 86 parishes would put $55 million into the trust. Insurers that have come to terms with the survivors committee would contribute $71.35 million, for a total of $126.35 million.
Put forward jointly with the survivors committee, the diocese plan also proposes to assign the diocese’s right to collect from non-settling insurers to survivors with claims in the bankruptcy. In practice, that could pit hundreds of individual abuse survivors against the lone non-settling carrier, CNA, in state court actions.
Such cases could be fraught for survivors and CNA. The insurer might be able to get some claims thrown out. But the insurance company could also see some juries grant greater awards than it would have paid in a bankruptcy settlement.
CNA’s reorganization plan calls for it to add $75 million to the trust proposed by the diocese, bringing it to a total of $203.35 million. The plan also calls for CNA to be armored against any further legal action.
CNA describes its plan as a boon for survivors that would quickly settle the bankruptcy, allowing “abuse claimants to speak for themselves regarding whether they prefer to accept the certainty of CNA’s $75 million contribution to the trust, without the risks, costs, and delays of litigation, or instead want to bear the risks, burdens, and delay they would face to obtain payment from CNA under the diocese-committee plan.”
Survivors committee attorney Ilan Scharf strongly disagrees, arguing in a brief that after it unreasonably stalled any settlement, CNA is now trying “to leverage the difficult position it created for the (diocese) by presenting the (diocese) with a binary choice: either accept CNA’s misleading valuations of the underlying claims or contest these valuations and draw out the bankruptcy process.”
CNA is responsible for paying a far larger share of the cases claims, Scharf notes in another filing. On a per-claimant basis, Scharf asserts, CNA’s $75 million offer falls woefully short of sums settling insurers have agreed to pay,
While CNA presents its $75 million offer as a boon that would offer survivors a certain resolution, Scharf maintains in court papers that CNA is trying to lowball survivors with an offer that is “clearly insufficient … and is clearly designed to confuse survivors.”
For a Chapter 11 reorganization plan to move forward, a presiding judge has to say the plan can go to a vote by creditors. Creditor approval is not final, however. Presiding judges have final say and can accept a creditor-approved plan as written, order modifications to it or reject it outright.
How Warren will handle the dispute between the competing plans is not yet clear. He could let either the diocese’s or CNA’s plan go to a vote. Or he could say that both plans—or neither—can move forward.
Will Astor is Rochester Beacon senior writer. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to [email protected].