A lawyer for some insurance companies that may be responsible for child sexual abuse claims against the Boy Scouts of America urged a judge on Thursday to reverse a bankruptcy plan for the organization, citing collusion with the plaintiffs’ lawyers to pressure insurers to reach agreements.
Ted Boutros, an attorney representing the no-settlement insurers, said the reorganization plan was not proposed in good faith and improperly strips no-settlement insurers of their rights to contest claims.
“We’re just asking for justice,” Boutros told US District Court Judge Richard Andrews, who began hearing two days of arguments on appeals from certain insurers and sex abuse claimants.
In September, US bankruptcy judge Laurie Selber Silverstein approved a $2.46 billion reorganization plan that would allow the Irving, Texas-based Boy Scouts of America to continue to operate while compensating tens of thousands of men who say having been sexually abused as children while participating in Scouting. .
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More than 80,000 men have filed complaints saying they were abused as children by troop leaders across the country. Opponents of the plan say the staggering number of claims, when combined with other factors, suggests the bankruptcy process was rigged.
“We know that a large part of them are not legitimate claims,” Boutros said, referring to a statement made by one of BSA’s own experts. Boutros also noted that a lawyer for the plaintiffs acknowledged that some 58,000 claims probably could not be pursued in civil lawsuits due to the passage of time.
The Boy Scouts of America present the colors during the national anthem at NRG Stadium on October 31, 2021 in Houston, Texas. Lawyers for the insurance companies responsible for abuse claims against the Texas-based Boy Scouts of America are urging a judge to reverse a bankruptcy plan for the organization. (Photo by Bob Levey/Getty Images)
When it filed for bankruptcy protection in February 2020, the BSA had been named in some 275 lawsuits and told insurers it was aware of another 1,400 claims. The large number of claims filed in the bankruptcy was the result of a nationwide marketing effort by personal injury lawyers who worked with for-profit claims aggregators to attract clients, according to opponents of the plan.
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 coverage in excess of 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 grossly inflated payments.
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Glenn Kurtz, a lawyer for the Boy Scouts, told Andrews that opponents have to prove that Silverstein made a “clear mistake” in approving the plan, but that they don’t dispute any of the factual conclusions he made.
“Frankly, the insurers, neither in their documents nor today, have identified a single court finding that could support a final finding of bad faith,” he said.
Under the plan, which the BSA describes as a “carefully calibrated compromise,” the BSA itself would contribute less than 10% of the proposed settlement fund. Local BSA councils, which run the daily operations of the troops, have offered to contribute at least $515 million in cash and property, subject to certain protections for local troop-sponsoring organizations, including religious entities, civic associations, and community groups.
Most of the compensation fund would come from the BSA’s two largest insurers, Century Indemnity and The Hartford, which reached agreements requiring them to contribute $800 million and $787 million, respectively. Other insurers agreed to contribute about $69 million.
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Insurers opposed to the plan argue that the BSA is contractually obligated to help them investigate, defend and settle claims, as it did before the bankruptcy. They say the BSA, desperate to escape bankruptcy, colluded with plaintiffs’ lawyers to inflate both the volume and value of claims in order to pressure insurers for big settlements and then transferred their insurance rights to the agreement trust. The insurers argue that if the BSA transfers its rights under the insurance policies to the settlement administrator, it must also transfer its obligations under those policies.
Boy Scout attorneys and plan supporters say the BSA’s obligations under the insurance policies are transferred to the trustee, subject to the bankruptcy plan as “governing law.” Insurers who fail to settle say the language creates too much uncertainty about their rights and how much discretion is being given to the retired bankruptcy judge who would oversee the settlement trust.
Andrews will hear arguments Friday from lawyers for abuse survivors who say the plan contains improper liability releases that prohibit them from suing non-debtors, including BSA local councils, BSA insurers and troop-sponsoring organizations. .
