Judge Orders Camden Diocese to Rework Bankruptcy Plan After Insurers’ Complaints

The Catholic Diocese of Camden, New Jersey must rework its bankruptcy plan to better protect insurers from invalid and inflated sexual abuse claims and unreasonable attorneys’ fees.

Citing some concerns raised by insurers, U.S. Bankruptcy Judge Jerrold Poslusny Jr. declined to approve the eighth reorganization proposal put forth by the church that is facing millions of dollars in claims of sexual abuse by clergy. The plan was approved by the committee for survivors.

“The court cannot approve a plan which allows attorneys to file invalid and fraudulent claims without consequence,” Poslusny wrote in his opinion ordering a reworking of the plan.

The plan calls for some insurers to pay $30 million into a trust to cover claims and expenses. The participating insurers expressed concern that the plan has loopholes that could end up costing them more than the agreed-upon $30 million.

The judge did not agree with all of the insurers’ criticisms but did single out one feature, a so–called “quick pay” option under which claimants could get $2,500 without any real examination of the validity of their claims.

The judge said there have been claims that make no allegations against the church or do not involve minors. He said the plan cannot be an “avenue for claims that are facially invalid or fraudulent.”

The judge said there is room for an expedited pay system in the process but the plan must be adjusted so that there is a mechanism for review and denial of claims that are facially deficient.

In addition, Poslusny agreed with insurers that the plan as written could lead to unreasonable attorneys’ fees. He pointed to a provision whereby, after simply checking boxes on a nine page claim form, the attorney automatically gets 40% of the settlement.

The judge said the court cannot allow attorneys to collect fees in excess of what is permitted under New Jersey law or in excess of what is “reasonable for the work required and risk taken.”

The diocese has indicated it will submit a revised plan as soon as possible.

In addition to the $30 million from a number of insurers, the plan that was approved by the committee for survivors calls for the diocese and related church organizations to contribute $87.5 million into the trust.

The diocese has been dealing with claims of sexual abuse against minors by clergy members for years. From 1990 to 2019 the diocese paid $10 million to survivors. In 2019, it established a survivors fund that has paid out more.

The diocese filed for Chapter 11 bankruptcy in October 2020, citing liability claims it faced after New Jersey enacted the Child Victims Act, a law that reopened the statute of limitations to allow claims for those alleging they were abused when they were children.

The plan’s $30 million insurance provision does not include all of the diocese’s insurers. Plaintiffs will be free to pursue separate action against non-settling insurers.

The insurers challenging the plan include Lloyd’s of London underwriters, Federal Insurance, Illinois Insurance, Granite State, National Union Fire, Century Indemnity, Interstate Fire, Lexington Insurance, and the National Catholic Risk Retention Group.

The diocese serves 480,000 Catholics across 62 parishes. It has released the names of 55 priests credibly accused of abuse.

Top photo: The Cathedral of the Immaculate Conception in Camden, N.J., Wednesday, April 20, 2022. (AP Photo/Matt Rourke)