Bankruptcy Judge Denies Survivors’ ‘Hopeless’ Bid to Sue Rockville Diocese Insurers

The judge overseeing the Catholic Diocese of Rockville Centre bankruptcy has denied a request by the committee representing sexual abuse claimants for permission to sue the church’s insurers, calling the filing a “hopeless” exercise.

The committee is protesting that the insurers are engaged in discussions with the New York diocese that could result in a settlement without the consent of the survivors.

Justice Martin Glenn of the U.S. Bankruptcy Court for the southern district, denied the committee’s request because he found it is based on speculation over a settlement that has not happened and because the costs of the litigation would outweigh any benefits to the church’s estate.

The Rockville diocese filed for protection under bankruptcy in October 2020 as it faced more than 600 lawsuits of alleged clergy abuse after New York State enacted the Child Victims Act. The bankruptcy halted the cases in state court subject to the church coming up with a plan with insurers and survivors and approved by the bankruptcy court to handle the claims.

The court has given the church until October 31 to come up with a plan. If there is no plan, the judge could end the bankruptcy process and return the lawsuits to state court.

Judge Glenn noted that any settlement would have to be approved by the court and that the survivors would have the opportunity to weigh in during proceedings.

The survivors’ committee previously lost a bid to end the bankruptcy proceedings.

The insurers involved in the talks include Allianz units Interstate Fire & Casualty Co., Fireman’s Fund Insurance Co. and National Surety Corp., along with Certain Underwriters at Lloyd’s and London Market Companies. The insurers issued policies covering the time period from 1976 to 1986. Allianz companies wrote excess insurance coverage.

Glenn called the committee’s proposed litigation “a textbook case demonstrating a hopeless filing” in which the committee “claims that it does not ‘expect’ litigation costs to be excessive yet does not provide the value of any financial recovery nor elaborate on the economic effects of the disastrous consequences of protracted plan confirmation negotiations.”

As a result, he concluded, the costs associated with the pursuit of the committee’s litigation would “substantially outweigh the benefits.”