DULUTH - An insurance company has agreed to pay nearly $9 million to victims of child sexual abuse as part of the first settlement reached in the Diocese of Duluth's bankruptcy case.
Nebraska-based Catholic Mutual Relief Society of America is one of five insurers that were sued by the diocese, which filed for bankruptcy nearly two years ago and sought to force coverage of 125 abuse claims.
Diocese spokesman Kyle Eller called the agreement a "major step forward" for both the diocese and victims.
"The diocese has always wanted to provide compensation to victims in the most just way possible and to emerge from bankruptcy as soon as we can," he said. "Today's settlement represents progress toward both goals. The settlement is a collaborative effort among the affected parties, and it's one the diocese supports and believes to be fair."
U.S. Bankruptcy Judge Robert Kressel is expected to approve the $8.95 million agreement at a Jan. 4 hearing, barring any unexpected objections.
Attorney Josh Peck, who represents most of the victims through St. Paul law firm Jeff Anderson and Associates, said the settlement was encouraging. But he noted that it is only one component of the diocese's reorganization plan and its obligation to victims.
"This is a fair amount for Catholic Mutual to pay based on the circumstances, but there is still a lot of work to do," Peck told the News Tribune. "It doesn't mean that this case is over - or near over - but it's promising that this one insurer was participating and negotiating in good faith."
The diocese filed for Chapter 11 bankruptcy in December 2015, weeks after being hit with a $4.9 million verdict in the first case to go to trial under the Minnesota Child Victims Act, which opened a window for victims of decades-old cases to file suit.
The insurance lawsuit was filed in June 2016, with diocese officials and victims' representatives saying it was necessary to force the participation of insurers in settlement discussions.
Litigation remains pending against Liberty Mutual Insurance Company, Fireman's Fund Insurance Company, Church Mutual Relief Society of America and Continental Insurance Company.
Peck said those cases will have to be resolved before a final reorganization plan can be reached to fully compensate the victims and allow the diocese to emerge from bankruptcy protection.
Catholic Mutual's payment is contingent upon the confirmation consensual reorganization plan, which attorneys said is "not imminent despite negotiations."
The 125 claims date as far back as the early 1940s, providing challenges for attorneys to sort through historical policies and determine each insurer's obligations. But Peck said he hoped the settlement will help resolve the remaining disputes.
"We don't want to hurry and get a plan that isn't fair," he said. "It does take a long time and it can be frustrating. But to get the best results, it's going to take some time."
In a motion seeking approval of the settlement, diocese attorneys Ford Elsaesser and Phillip Kunkel wrote that the diocese felt "confident about the merits of its position," but said the settlement would provide a "known outcome" and prevent further litigation and appeals that could prolong the case for several years.
"The (diocese) has exercised its business judgment and concludes that it cannot reasonably justify the expense, delay and uncertainty of pursuing coverage litigation against Catholic Mutual," they wrote. "The proposed settlement is well within the range of likely outcomes of the insurance coverage disputes and represents an appropriate compromise and settlement taking into account the costs, risks and potential rewards of litigation."