The Boy Scouts of America’s plan for resolving 82,200 claims of childhood sexual abuse is being opposed by some insurance companies that worry some victims’ claims may not be worth as much as what the youth group says they are.
Several liability insurers have said the Boy Scouts’ chapter 11 plan pegs the value of abuse claims at higher levels than what victims likely would get in state-court lawsuits or private negotiations, and that those estimates could be used by victims to extract more money from them.
The Boy Scouts have said in court filings that the estimates of values of claims and the process established under its plan to award payouts mimic what victims would experience in the state-court system.
The Boy Scouts next week are scheduled to begin seeking approval of their bankruptcy plan, which includes a $2.7 billion victims’ settlement fund with contributions from two major insurers, in the U.S. Bankruptcy Court in Wilmington, Del. The Boy Scouts’ own assets, its local councils and some troop sponsors make up the rest of the settlement fund.
The youth group filed for bankruptcy two years ago amid a growing wave of litigation from abuse victims. The organization has apologized for past failures to protect children and said bankruptcy is the fairest way to resolve its liabilities and compensate survivors.
How much each individual victim will get under the proposed plan is still unknown, and will be decided by a trustee who will assess each claim based on factors such as the severity of the abuse, statutes of limitations in the relevant states, whether the perpetrator was a repeat offender and the strength of evidence provided.
Some liability insurers that haven’t contributed to the Boy Scouts settlement fund remain exposed to further litigation from victims. They continue to oppose the bankruptcy plan, saying it puts them on the hook for inflated or unverified claims.
Insurers tied to
American International Group Inc.,
Travelers Co. and other carriers are concerned about the valuations that the Boy Scouts plan assigns to abuse claims and one set of valuation estimates put forth by the youth group’s expert for both individual and aggregate claims. They argue that levels of fair compensation for different types of abuse laid out in the youth group’s restructuring plan and by the group’s expert are inflated compared with historical settlement amounts. They are asking the judge not to endorse a set of valuation estimates that they believe might make it easier for victims to seek higher amounts from them after the Boy Scouts exit from bankruptcy.
Hartford Financial Services Group Inc.
’s Century Indemnity Co., the youth group’s two largest insurers, have put up nearly $1.59 billion combined to resolve their coverage obligations, and will be shielded from any further litigation from victims.
If the trustee values the claims against the Boy Scouts at a much higher number than the $2.7 billion available in the settlement trust, victims could claim they were only paid a portion of what they are owed and use the numbers as a basis to pursue litigation against insurers that didn’t contribute to the fund.
At the same time, if the Boy Scouts can make a strong case that it is paying off abuse plaintiffs in full, that would help win approval for the bankruptcy plan, said Lindsey Simon, assistant professor at the University of Georgia School of Law.
In January, a claims consultant hired by the Boy Scouts, Charles Bates, estimated that claims would total between $2.4 billion and $3.6 billion, meaning they could likely be paid in full once the value of additional insurance policies was realized. In an earlier report, Dr. Bates had pegged the upper limit of the range of values of total claims at nearly twice that amount, or $7.1 billion.
Meanwhile, some representatives for abuse survivors, relying on their own expert, have said the total damages owed to survivors are far larger than what the Boy Scouts have estimated, pegging the total at as much as $30 billion.
Dr. Bates estimated the aggregate value of all claims by studying 262 settlements the Boy Scouts reached with sex-abuse victims since 2016. His analysis included several adjustments, some based on instructions from the Boy Scouts.
The bankruptcy plan now up for court approval provides higher estimates for compensation than Dr. Bates’s original report in some respects. For example, victims of rape involving penetration are assigned claims of between $475,000 and $2 million in the bankruptcy plan, compared with a range of $550,000 to $975,000 for penetration claims in his original report. He also projected $1.3 billion in compensation for victims whose claims are barred by state statutes of limitations, after initially estimating those claims would get nothing.
The values the Boy Scouts’ plan assigns to victims’ claims reflect negotiations between the organization and victims’ lawyers, according to people involved in the bankruptcy case. Insurers have seized on discrepancies to argue that the Boy Scouts’ plan compensates victims at inflated rates compared with historic settlements.
—Becky Yerak contributed to this article.
Write to Soma Biswas at email@example.com
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