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	Insurers Still an Issue for Church By Annysa Johnson Milwaukee Journal Sentinel January 22, 2011 http://www.jsonline.com/features/religion/114431359.html Wisconsin courts have ruled to date that the Archdiocese of Milwaukee is on its own to pay any settlement to victims of clergy sex abuse - a first for dioceses that have filed for bankruptcy. But legal experts say insurance coverage - or at least a battle over it - could still come to bear as the archdiocese moves through bankruptcy. "I wouldn't assume the insurance question is dead yet," said Jonathan Lipson, a University of Wisconsin-Madison law professor who has written on Catholic Church bankruptcies. Insurance issues in clergy sex abuse cases are notoriously complex, in part because allegations may span decades. There are often layers of policies covering blocks of years, multiple companies that have merged or gone out of business, and varying language about what is and isn't covered. Policies may have been lost, records destroyed. Legal experts are offering a number of scenarios in which insurance issues could arise in the Milwaukee bankruptcy proceedings. Among them: The court could order an exhaustive search for additional policies or a carrier could come forward with a voluntary settlement. Predicting how it will play out is virtually impossible, they say. "One reason this is so hard is the really complicated interplay between the federal bankruptcy system and state rules that govern insurance contracts," Lipson said. Ironically, the lack of insurance liability is the result of the Milwaukee Archdiocese's earlier successes in fending off clergy sex abuse lawsuits. In courts around the country, victims have sued the Catholic Church alleging "negligent supervision" of its priests. Because negligence isn't intentional, it's generally covered by insurance. But the Wisconsin Supreme Court blocked such lawsuits in a landmark 1995 decision. In Pritzlaff vs. the Archdiocese of Milwaukee, the court ruled that a judicial review of the diocese's hiring and transfer decisions would violate the First Amendment separation between church and state. The court ruled that it had no role in determining what made a competent priest. That ruling - the only one of its kind in the country, according to victims - effectively closed the door on clergy sex abuse cases in Wisconsin for a decade. The state Supreme Court reopened that door in 2007, ruling that victims could sue for fraud in cases where the church shuffled abusive priests from parish to parish without telling people about their histories. But fraud is rarely covered by insurance. Policy archaeologists One of the first things creditors, in this case the sex abuse victims, are likely to do is ensure that no source of insurance coverage has been overlooked. Across the country, dioceses have employed so-called insurance archaeologists to scour records for evidence of additional coverage. In the Diocese of Wilmington, for example, a search provided both additional policies and an interpretation of policy language that victims and the church argued would increase the amount of money insurers owe, according to lawyers familiar with the case. Insurers disputed that interpretation but have increased their contribution to a proposed settlement. As an example of how phrasing in a policy can affect a case, at issue in Wilmington was how to define "an occurrence" of abuse, which created tension for the diocese. "On one hand, they want that insurance in the pool; on the other, they don't want all of father's molestations aired," said James Stang, a Los Angeles attorney who has worked on bankruptcy cases for creditors in Milwaukee, Wilmington and elsewhere. Stang would not comment on legal strategy for the Milwaukee case. Jerry Topczewski, chief of staff for Milwaukee Archbishop Jerome Listecki, said the archdiocese has extensively researched its coverage over the last decade, most recently in 2006, when it was hit with a $17 million judgment in a California case involving some of the same offenders in the pending Wisconsin cases. Insurance covered about half of that judgment. Appellate court ruling Much of what transpires on the insurance front in U.S. Bankruptcy Judge Susan V. Kelley's court is likely to depend on what happens in the state Supreme Court. The Milwaukee Archdiocese has asked the high court to review a November appellate court ruling barring it from tapping insurance for "negligent misrepresentation," a second cause of action added to the fraud lawsuits. The appellate court had ruled that insurers weren't liable because such acts were intentional, not accidental. Legal observers say Kelley is likely to lift the automatic stay imposed by the bankruptcy filing so the state Supreme Court can rule on the insurance question. "The most logical thing to do is to let the (Supreme) Court with more knowledge about insurance issues go forward . . .  as long as that can be done in short fashion," said Ralph Anzivino, a Marquette University law professor who specializes in bankruptcy law. If the state Supreme Court refuses to hear the archdiocesan appeal, the lower court ruling barring the use of insurance would likely stand. Even if the high court sides with the insurer, policy language in many states requires that the underlying allegations in the abuse lawsuits - fraud and negligent misrepresentation in these cases - be proved before the final question of coverage is resolved. The determination of the underlying charges could be made by Kelley, or she could allow the state courts to move ahead and decide, said Jonathan Cohen, a Washington-based attorney who specializes in insurance law in bankruptcies. A protracted legal battle over coverage - and concerns it could lose, and face a costly verdict - could persuade a carrier to voluntarily join a settlement, as a way to stem its losses and get a cap on future claims, legal expert said. "An insurer is not going to pay claims they don't think they're liable for," Cohen said. "But it may be willing to participate, in that it gets some finality in the bankruptcy case."
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