Diocese, Insurers Trade Accusations

By Sherry Robinson
Gallup Independent
April 22, 2015

http://gallupindependent.com/

Attorneys for the Diocese of Gallup and two of its insurers traded accusations and complaints during a hearing in U.S. Bankruptcy Court on Monday. But parties agreed to begin mediation in early June.

The three biggest points of disagreement were the diocese’s ability to satisfy requests for information, the incidents of abuse actually covered by insurance, and the determination of who is liable.

On Friday, Catholic Mutual filed a nine-page complaint stating that the diocese had been uncooperative, that it still needs information, and that only 15 of 57 claims fall under Catholic Mutual’s period of coverage. The insurer still needs information about all the sex abuse claims submitted, along with the diocese’s defenses to these claims. Instead of providing information, the diocese has instead erected roadblocks, the insurer said in its complaint.

Susan Boswell, attorney for the diocese, said during Monday’s hearing that her client had struggled from the outset of the bankruptcy filing in November 2013 to bring books and records up to date and to identify and obtain valuations of properties held by the diocese, which she said were mostly vacant land in Winslow, Holbrook and other locations in northern Arizona, as well as the Gallup area.

“It’s been quite a challenge to assemble records,” she said. “We’re trying to figure out a way to monetize that property. It’s not the easiest task. We’re trying to fund a mediated settlement and a reorganization.”

After retaining Insurance Archeology Group to reconstruct insurance records, it appears that Catholic Mutual and the New Mexico Property and Casualty Insurance Guaranty Fund are still the primary insurers, although the Franciscan Province of St. John the Baptist in Cincinnati (three of the offending priests were Franciscans) may contribute to a settlement. “We have worked with the Franciscans, who have provided significant information about the insurance coverage they may have,” Boswell said.

‘Offers and counter offers’

Jim Stang, attorney for the unsecured creditors’ committee and the representative of sex abuse claimants, said the diocese and committee have largely agreed what properties to include.

“To me, this is about getting to mediation and coming to mediation ready to make offers and counter offers,” Stang said. “We hope to do this the first two weeks of June. I don’t want to get another phone call saying one of the survivors has died. We started before Christmas offering information. The committee is ready to go forward and mediate a global resolution of case.” Boswell and Stang asked Bankruptcy Judge David T. Thuma to order these parties to mediation: the diocese, the committee, Catholic Mutual, New Mexico Property and Casualty, the Franciscans, the parishes of St. Johns and Sacred Heart Cathedral, and the Catholic People’s Fund.

Responding to Catholic Mutual’s complaint, Boswell said: “We tendered all 58 claims filed in the case … We understand they may cause consternation when claims are submitted for incidents that occurred before coverage. We had a duty to submit those claims. We understand the insurers’ need for information on each claim. We tried to elicit as much information as possible.”

Also at issue are the legal files of Robert Warburton, a New Mexico attorney who defended the diocese before the bankruptcy filing. Catholic Mutual wants to interview Warburton and see his files, but the diocese refused, according to the complaint. On Wednesday the diocese produced the files, heavily redacted. Boswell said of the Warburton files that there is attorney-client privilege, “and the client asserts that privilege.”

Attorney David Spector explained that the Catholic Mutual Relief Society of America and the Catholic Relief Insurance Company of America, referred to as Catholic Mutual, are the Catholic church’s self-insurance fund in North America, which “tries to help dioceses in these situations,” said Spector. Catholic Mutual has covered the Gallup Diocese in different forms since 1977, and there are claims before and after coverage the certificates of coverage.

The diocese cops an ‘attitude’

“This situation is a little unique,” Spector said. “We rarely see a situation where a diocese takes the attitude of this one. Catholic Mutual is not ready to resolve 57 or 58 claims, when 42 are pre-certification claims. We can’t resolve this when 75 percent of claims are subject to dispute.”

In addition, Catholic Mutual has been unable to investigate the 57 claims because the diocese hasn’t provided all the requested information, and some of the information was heavily redacted.

“We don’t want to go to war with the debtor or the credit committee, we just want information,” Spector said. “It’s gotten kind of petty.”

Stang said 15 claims were properly within the coverage period of Catholic Mutual, and that the creditors’ committee has recommended to the diocese that mediation be confined to the 15.

Edward Mazel, attorney for the New Mexico Property and Casualty, said, “The Catholic Mutual statement of Friday is eerily similar to our own experience.” His client picks up obligations of defunct insurance companies and is the successor to the Home Insurance Company, which insured the diocese from 1965 to 1977, when it went out of business. “We tried to analyze documents to the extent we were able,” Mazel said. He asked for priest files in December and didn’t receive them until last week.

Boswell responded that “the diocese doesn’t have the personnel nor are records organized in a way that makes it easy to produce records on request. I understand the need for information.”

When it became clear that the diocese was willing to drop its demand that Catholic Mutual mediate all 57 claims, the parties resolved to mediate.

Retired bankruptcy court judge Randall Newsome is willing to mediate the case pro bono, but he has made it clear the parties must be ready to negotiate in good faith and not use the mediation to gather information.

“We need to get this case done,” Boswell said. “We’ve spent considerable time and money providing information to third parties to get people to the point of sitting down with a mediator.”

Judge Thuma asked Boswell to prepare a mediation order and scheduled a hearing next Monday.

Still unanswered is the question of liability for the Diocese of Corpus Christi, which previously employed Father Clement Hageman.

“Corpus Christi is hardest,” Stang said. “There are lots of disputes about whether Corpus Christi should be held liable for Father Hagerman, the main perpetrator in about one-third (18) of the claims. He hurt a lot of people. We think Corpus Christi should be at the mediation too.”

Daryl Diesing, attorney for the Corpus Christi Diocese said: “Father Hageman was discharged from Corpus Christi. It was not kept a secret. We don’t feel the court has jurisdiction over Corpus Christi. There is no way we are close enough in our discussion that we should be dragged into mediation.”