Bankruptcy May Be Archdiocese’s Solution For Abuse Settlements

By Kate Raddatz
CBS Minnesota
October 14, 2014

http://minnesota.cbslocal.com/2014/10/14/bankruptcy-may-be-archdioceses-solution-for-settlements/

MINNEAPOLIS (WCCO) – After a historic settlement in clergy sex abuse lawsuits in Minnesota, now the question becomes how the Catholic Church will pay for it.

The exact amount of the settlement has been kept confidential, but experts say it could cost the Archdiocese tens of millions of dollars.

On Monday, the Archdiocese of St. Paul and Minneapolis along with the Diocese of Winona said they were considering all options to pay for the settlement, including bankruptcy.

Experts say if their insurance doesn’t step up to cover the payment of this settlement, it could be very likely they will file for bankruptcy.

But as for whether or not a bankruptcy claim would then cause Catholic school or churches to shut down, it is unlikely.

As the Archdiocese of St. Paul and Minneapolis, along with the Diocese of Winona, review their finances to see if they have the assets to pay for their lawsuits, bankruptcy remains on the table.

“You always have that trigger question, ‘Will the insurance cover everything that is being sought?'” Professor of Law at University Of St. Thomas, Charles Reid, said.

Insurance does cover negligence, but if they won’t cover claims involving intentional wrongdoing, the Catholic Church will have to come up with the funds.

“Dioceses that have faced liability like this before have used the bankruptcy code,” attorney Jeff Anderson said.

Claiming bankruptcy would mean the church could pay a fraction of the settlement.

Over the past decade 11 dioceses across the country have filed bankruptcy due to lawsuits.

“There’s a good way and a bad way to file for bankruptcy and there’s models of each right now,” Reid said.

Attorney Jeff Anderson says the best case scenario in a bankruptcy filing would be holding the church accountable to survivors.

While he says it is possible for a Catholic Church or school to close down as a result of bankruptcy, it’s never happened within any diocese that’s filed.

“The good work that they do in the parishes, and in the schools and hospitals continues unabated and uninterrupted,” Anderson said.

A judge can still reject the bankruptcy filing.

Anderson says he hopes insurance will avoid a bankruptcy claim.

“We just want to make sure they don’t continue the dangerous and reckless practices that have been revealed,” Anderson said.

WCCO reached out to the Archdiocese of St. Paul and Minneapolis for a comment but did not hear back.

Attorney Jeff Anderson told WCCO if they do file bankruptcy, he says he and his clients would work with them to ensure that the operation of any church organizations in Minnesota would not be affected.

They simply want to make sure there is justice for survivors both in truth and in compensation.