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The federal bankruptcy proceedings governing the Diocese of Rochester and its 485 creditors, most of whom are priest abuse survivors, has been stalled for months as lawyers for both sides wrangle over insurance coverage and the actual assets of the Diocese.

A July 9, 2021 telephonic hearing with Judge Paul Warren  featured both sides presenting their points of view concerning the proposed $35 million settlement proposal offered by the Diocese of Rochester.  Abuse survivors believe the settlement offer is paltry and doesn’t reflect the true value of the Diocese’s assets.  There is also debate concerning insurance coverage with multiple companies balking at participating in any bankruptcy settlement.

How the court comes down on the proposed Rochester diocese settlement could set the tone, not just for the Rochester case, but also for Chapter 11 bankruptcies of three other New York Catholic dioceses that asked for court protection months after the Rochester diocese’s September 2019 filing.

Four hundred and eighty-five such survivors have filed claims in the case. Not yet clear is what sort of financial compensation each might win. What kind of claims the diocese proposes to pay will be largely determined by how much dozens of insurance companies that wrote liability coverage for the diocese decades ago contribute.

The proposed $35 million deal would cover claims pressed by roughly only a quarter of the 485 survivors seeking compensation in the case, leaving too much still to be decided and letting insurers off the hook too cheaply, the creditors committee lawyer maintains.

The Rochester bankruptcy has been halting and acrimonious.  Survivors are particularly wary because they played no role in drafting the proposed settlement agreement.  Creditors committee counsel Ilan Scharf has not yet filed an official objection to the deal worked out between the diocese and a dozen insurers but says he plans to do so by the filing deadline Bankruptcy Judge Paul Warren set for papers for and against the proposal.

Scharf has filed papers supporting a request by 20 of the 485 abuse survivors who have brought claims in the Chapter 11 case to be allowed to press their claims in state court. The 20 survivors’ request to lift the freeze the diocese’s bankruptcy filing automatically imposed on their state-court actions and the proposed settlement are related developments in the long-stalled case, Scharf says. Determinations in state court would help clarify how much compensation survivors should get.

The Rochester diocese’s Chapter 11 came in response to the state’s passage of the Child Victims Act, a 2019 measure that temporarily lifted a two-year statute of limitations on sexual abuse claims.

The various disputes were be highlighted during the July 9th hearing with the federal bankruptcy judge.  The hearing may be determinative in this case and impact the bankruptcy proceedings in the other New York Catholic bankruptcies.

The Clergy Sexual Abuse Crisis

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