Insurers Paid $43 Million of $150 Million Boston Clergy Abuse Settlements

April 20, 2006

The Roman Catholic Church in Boston has paid a total of $150.8 million through June 2005 to settle claims of sex abuse by clergy, with $43.3 million of that paid by insurance companies, according to financial information released by Archbishop Sean O’Malley.

The $150.8 million includes the total costs of the sexual abuse settlements of $127.4 million plus $23.4 million spent on abuse prevention programs and outreach to survivors of sexual abuse, church documents show.

These figures include a global settlement of 541 claims reached by Archbishop O’Malley in the fall of 2003 at a cost of $84.1 million.

The total $43.4 million received from the two primary insurers for the archdiocese, Lumbermens Mutual and Travelers, has been supplemented by $20.1 million from the church’s own insurance reserve fund and $2.0 million in donations made specifically for the purpose of funding therapy assistance for survivors.

The bulk of funds to settle sex abuse claims came from the sale of Archdiocese of Boston properties. These included the sale of its Brighton campus ($68.8 million) to Boston College and other church properties ($16.5 million).

Recovery from insurance carriers was complicated by the fact that one of the insurers, Lumbermens Mutual, faced financial difficulties.
Lumbermens provided general liability coverage for the period beginning in the mid-1950s and continuing until early 1983, a span of time involving an estimated 80 percent of the claims.

In March 2004, the Archdiocese sued Lumbermens Mutual. The litigation concluded in February of 2005, when the parties achieved a settlement under which the Archdiocese received $20 million from Lumbermens in an arrangement that recognized that Lumbermens was a failed insurer.

“Because of the severely deteriorated financial condition of Lumbermens at the time of the settlement, with Lumbermens out of the active insurance business and on the brink of financial insolvency, the settlement was done on a ‘buyout’ basis in which, in return for the payment to be made by Lumbermens, the rights of the Archdiocese to claim against the Lumbermens under the policies in the future were extinguished,” the church discussion of the settlement reads.

Of the $20 million from Lumbermens, about $13 million was allocated towards reimbursement for already settled claims, while the balance went toward settling or defending then pending or future claims.

The Archdiocese also reached an $8.5 million settlement with its other principal insurance carrier, Travelers Insurance Company, which provided general liability coverage for the period spanning 1983-1989.

With the settlement of the claims against Lumbermens and Travelers, the total amount received from insurance toward the $127.4 million in settlements negotiated and concluded by the Archdiocese through June 30, 2005 was $43.4 million, or about 29 percent of the sources of fund used to settle the claims.

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