Judge Denies Insurers’ Appeal in Boy Scouts Reorganization Plan

A federal judge on March 28 denied an appeal, largely made by insurers, to strike down the Boy Scouts of America’s nearly $2.5 billion reorganization plan approved last year to allow the organization to settle tens of thousands of sexual abuse claims.

The more than 150-page document from Judge Richard G. Andrews in the U.S. District Court for the District of Delaware said the appellants, which included subsidiaries of AIG, Liberty Mutual, Allianz, Sompo International, and Travelers, “failed to put forth evidence that would demonstrate clear error in the Bankruptcy Court’s careful findings of fact.”

The insurers, as well as some abuse claimants, appealed the plan. Insurers in November asked the judge to find that the Boy Scouts of America (BSA) Chapter 11 reorganization plan did not meet confirmation requirements and was not proposed in good faith. The claims-count has increased, they said, 6,000% to over 82,000 since the bankruptcy filing.

A “significant portion are likely fraudulent,” the insurers claimed. The plan also does not give the insurers due process to control or participate in the defense of the claims, leading to an outcome of “claim values that are higher than those that would have been produced in the tort system.”

Andrews said he found no evidence the bankruptcy plan was “proposed with ulterior motives, that the plan’s development process suffered from BSA’s unclean hands, or that the plan process otherwise indicates a lack of good faith.”

In addition, the insurers “introduced no evidence contradicting the testimony [of expert witnesses] or to otherwise support their argument that future claim values will be inflated,” said Andrews, who added that the courts will decide if awards “are covered by any particular insurance policy to the extent that there is a dispute in the future about that matter.”

Other insurers of the Boy Scouts of America (BSA), subsidiaries of Chubb, Zurich, and The Hartford, have previously agreed to contributions toward the plan. According to the filing, the settlements bring nearly $1.66 billion to the Settlement Trust.

Andrews said the plan was supported by “every estate fiduciary and nearly every organized creditor group – a commendable result for a such a length, contentious, and ’emotionally charged’ proceeding” that included thousands of hours of mediation, nearly 60 hearings, a 22-day confirmation trial, and 300 pages of opinion.