Court ruling for insurer a devastating loss for N.Y. archdiocese

Timothy Cardinal Dolan is in no rush to discuss efforts to change the child abuse law.

By Brendan J. Lyons

A state appellate court delivered a devastating blow to the Archdiocese of New York in a unanimous decision Tuesday that found the Catholic organization’s longtime insurer can move forward with its case challenging whether its policies covered claims for systemic child sexual abuse that may have been enabled and covered up by church leaders for decades.

Chubb Insurers argued that it has no duty to indemnify or represent the archdiocese in hundreds of lawsuits filed by individuals who were sexually abused by church employees, and that the archdiocese was not providing information that would allow the insurer to properly assess those claims.

The ruling rocked advocates and attorneys who have supported New York’s Child Victims Act and Adult Survivors Act, which had temporarily lifted the statute of limitations to allow alleged victims of sexual abuse to file once time-barred claims against their abusers or the institutions that harbored them.

“Today’s appellate court ruling represents the absolute opposite of the spirit of the Child Victims Act — and puts virtually every single Child Victims Act case covered by an insurance company at risk,” said David Catalfamo, executive director of the Coalition for Just and Compassionate Compensation, which bills itself as an independent alliance of survivors of child sex abuse.

“The entire insurance industry exists because any development could be theoretically expected or intended — people with flood insurance only buy it because a flood is expected,” Catalfamo added. “If upheld, the appellate court’s alarming ruling could allow insurers to deny claims to policyholders beyond sexual abuse cases — putting virtually anyone with an insurance policy at risk.”

But Chubb Insurers have countered that the archdiocese is making an argument akin to an arsonist burning down their house and then demanding to be paid out on their insurance policy. In court filings, they have asserted that their companies “have no duty to provide insurance coverage” in many of the sex abuse cases and that the Archdiocese of New York “alone must bear the full financial consequences of its criminal behavior.”

They noted that for decades the archdiocese’s clergy and employees raped and molested children entrusted to them in churches, schools and camps. The archdiocese hid those crimes, the insurer said, and “protected the perpetrators, and in many cases, punished and stigmatized those victims brave enough to come forward.”

The company issued a statement following Tuesday’s ruling by the state Appellate Division’s First Department noting the five-judge panel had rejected the archdiocese’s arguments and the lower court judge’s decision that had derailed their pursuit of a declaratory judgment.

The appellate court said the insurer’s complaint “sufficiently alleges that recovery would fall outside the scope of plaintiffs’ duties to defend and indemnify if the archdiocese had knowledge of its employees’ conduct or propensities.”

Cynthia S. LaFave, an Albany attorney whose firm represents nearly 100 claimants who have filed Child Victims Act lawsuits against the Roman Catholic Diocese of Albany, said the decision issued Tuesday was not unexpected and is far short of a victory for the insurers.

“I think the insurance companies will try to make a lot of noise about it,” LaFave said. “But it’s simply one of the steps in litigation. … It just means that they get to continue their case, and in the end, each of these cases will be heard on its own facts.”

She said that it’s likely most of the cases will be subject to coverage by the insurers.

The appellate court’s ruling came less than a month after the Coalition for Just and Compassionate Compensation sent a letter to state Sen. Neil Breslin and Assemblyman David Weprin, who chair their chambers’ insurance committees, requesting that they convene public hearings and examine whether the insurers are complying with the intent of the New York’s Child Victims Act.

The outreach by the coalition, whose members also include attorneys representing victims of clergy sex abuse, was unfolding as the legal battle over the obligation to provide coverage for the abuse perpetrated by priests and others was unfolding in the case filed in state Supreme Court last year by Chubb Insurers against the Archdiocese of New York.

“Given the gravity of these issues and their far-reaching implications for survivors across New York state, we respectfully request that the insurance committees of both the New York state Senate and Assembly, under your esteemed leadership, hold hearings to examine the insurance industry’s practices in relation to the CVA,” the coalition wrote.

The coalition claims the insurers have used their strategy in multiple jurisdictions, including cases involving Rockefeller University Hospital, Boy Scouts of America and school districts across New York.

The Archdiocese of New York is affiliated with or operates dozens of churches, schools and other entities that are facing thousands of claims under both the Child Victims Act and the Adult Survivors Act.

Chubb Insurers issued policies to the Archdiocese of New York beginning in 1956, but says they were intended to cover accidents, and not damages for “bodily injury that the insured expected or intended.” In 1986, Chubb Insurers began adding sexual molestation exclusions in its excess policies and, in 1988, to the primary policies.

James R. Marsh, an attorney who is a trustee of the survivors coalition and whose law firm specializes in child sex abuse litigation, told the Times Union last month that the standoff with the insurance companies has been compounded by the fact many Catholic dioceses have filed for bankruptcy in the face of thousands of Child Victims Act claims.

In those cases, dioceses end up paying millions of dollars in legal fees and insurers “have less of an incentive to come to the table because they know that by waiting out as long as they can, the situation is only going to get worse and worse,” Marsh said. “When you have an insurer that’s unwilling to come to the table to make good on these claims, the result is the diocese and the institutions go into bankruptcy.”

Marsh said the situation has been exacerbated by mergers and acquisitions of insurance companies, with investors often reluctant to pay coverage for claims that would draw down their assets.

In court filings, the Chubb Insurers have noted they have been continuing to defend both the Archdiocese of New York and its affiliated parishes and schools, but they have also sought more details on the organizations’ handling of sexual abuse cases, including details of any criminal conduct and the systematic efforts to cover it up.

Investigations and litigation have revealed that many dioceses hid sexual abuse cases from police and the public. Two years ago, the Times Union reported that former Albany Bishop Howard J. Hubbard, who died last year, admitted in a deposition that the diocese systematically concealed incidents of child sexual abuse and did not alert law enforcement agencies when they discovered it. He said their actions were, in part, intended to avoid scandal and preserve “respect for the priesthood.”

Priests and other employees accused of raping and abusing children were frequently sent to church-run treatment facilities and later returned to ministry with no notification to congregations. They also were routinely transferred to different dioceses when abuse was discovered, only to strike again.

The appellate court’s decision Tuesday reversed, in part, a December ruling by state Supreme Court Justice Suzanne J. Adams, who had rejected Chubb Insurers’ arguments. Adams noted that during an oral argument in the case, one of Chubb’s attorneys conceded that sexual abuse is “bodily injury.”

“Here, the Chubb Insurers simply do not have a cause of action,” Adams wrote. “The plain language of the insurance policies at issue covers bodily injury and negligence as alleged in the underlying (Child Victims Act) actions … and the complaint sets forth no facts that would support a declaratory judgment that the Chubb Insurers have no obligation to indemnify, and consequently no obligation to defend, ‘each of the 2,770 CVA-related lawsuits (they) are defending in which the (archdiocese) has or may have liability.”

In court filings, Chubb’s attorneys have argued that “when an insured perpetrates, tolerates, and hides a vast pattern of horrific child abuse across decades, no insurable ‘accident’ that occurred, and the (archdiocese) has the burden of proving facts showing that it is otherwise entitled to coverage under any of its insurance policies.”

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