Priest Abuse Payout May Be Costly

Damages claimed by hundreds of people who say they were sexually abused by Roman Catholic priests could exceed $1.5 billion in the Archdiocese of Los Angeles, far more than any other diocese has paid to date, according to newly released documents.

That total is based on a request -- by the lead lawyer for plaintiffs -- that insurers put aside at least $3.1 million per individual claimant to resolve child molestation cases involving the dioceses of Los Angeles and Orange. There are more than 500 child molestation claims naming Los Angeles-area priests and 60 more alleging abuse by priests from the Diocese of Orange.

Attorney Raymond P. Boucher says the amount is justified based on jury verdicts and settlements of other clergy sexual abuse lawsuits around the nation. He says it is also consistent with a Los Angeles judge’s secret valuation of the local claims after a closed, two-day evidentiary hearing earlier this year.

Since then, Boucher has asked two companies who insured the Diocese of Orange -- which is part of the Los Angeles clergy-abuse litigation -- to review their financial reserves to make sure the funds are sufficient to cover pending sex-abuse claims against the church. Damages, if proven, could be paid both by insurers for the church and from other church assets.

The dimensions of those key questions -- if claimants win, how much they can collect and from whom -- were revealed last week in letters to the insurers. Most of the proceedings in the consolidated cases, designed to settle once and for all the potential liability for the two dioceses, are held in secret. At least 20 insurance companies are involved, covering church liability since 1950, according to court records.

The amount that insurers are willing to pay has already emerged as a stumbling block to pretrial settlements in the first wave of cases, the 60 against the Orange Diocese. The claims against the diocese could reach at least $186 million, if the $3.1-million valuation method prevailed.

All three groups of interested parties -- claimants, the two dioceses and the insurers -- have jockeyed intensely for advantage in the massive litigation, documents and transcripts show.

Lawyers for those who say they were abused have accused insurers of failing to make a meaningful contribution to the amount of money the Orange Diocese is offering, a charge the companies deny.

In turn, lawyers for Los Angeles Cardinal Roger M. Mahony say in court papers that they are involved in a dispute with their own insurers over “the existence, nature and amount of coverage.”

And Boucher, the court-appointed liaison counsel for the plaintiffs, told state officials that the companies’ reserves were “woefully inadequate” to cover all the pending claims, as is required by state law. The claimants, he said, “have a vital interest in the adequacy of reserves.”

Liability coverage for the Orange Diocese, underwritten by Travelers Casualty & Surety Co. for 1976-81 and by Centennial Insurance Co. for 1981-87, provides “virtually unlimited coverage to the diocese for sex-abuse lawsuits,” Boucher asserted in letters to the insurers.

Unlike most newer policies, the Travelers and Centennial contracts don’t contain aggregate coverage limits for the types of negligence alleged in the abuse cases, Boucher stated. Centennial’s potential liability could hit $229 million in the Orange Diocese cases alone, according to his calculations. Travelers could be on the hook for up to $79.5 million, he said.

In June, Boucher notified California Insurance Commissioner John Garamendi of his concerns. The lawyer said last week that he planned to ask other insurers involved in the Los Angeles litigation to increase their reserves as well.

A spokeswoman for Travelers, Marlene Ibsen, said the company did not comment on individual risks or reserves but added, “We are comfortable with our overall reserve position.” A Centennial spokesperson did not return calls Friday.

In an interview, Boucher estimated that the L.A. Archdiocese had as much as $10 billion in potential insurance coverage. Mahony’s lawyers have recently acknowledged for the first time in court papers that their coverage for sex-abuse cases is “potentially billions of dollars.”

Coverage estimates vary wildly depending upon how the terms of each policy are interpreted. One of the biggest challenges, according to lawyers on both sides, is determining when policy limits are reached.

Lawyers for claimants, for example, contend that their clients are entitled to the maximum policy limit for each time they were fondled or raped by a priest. Insurers, on the other hand, want to calculate their losses more conservatively, applying the cap once for each victim, or even once per priest, regardless of the number of claims against him.

One of Travelers’ attorneys, James M. Altieri, declined to comment on Boucher’s estimates, citing a gag order by a judge. But a member of Mahony’s legal team said the estimates appeared to be excessive.

“We are still evaluating the cases, but $1.5 billion seems way too high,” said Donald F. Woods Jr. “As far as we know, there is not any diocese anywhere in America that comes anywhere near reaching that amount.”

The Archdiocese of Boston agreed last September to pay $85 million in church money to 544 alleged victims of clergy sex abuse, then sued Lumbermens Mutual Casualty Co. for failing to contribute to the settlement.

The insurer has defended its decision, saying that any payment would have been voluntary and that the company was not obligated to participate. Meanwhile, Boston church leaders sold a 43-acre parcel of church land to Boston College for $99.4 million in April to help end the litigation surrounding the 2-year-old clergy sex-abuse scandal. Each claimant was paid $50,000 to $300,000.

But plaintiffs’ lawyers say the cases are different. In Boston, most of the settled claims would have been thrown out of court because victims waited too long to sue. Under Massachusetts law, there is also a $20,000 cap in cases against charitable organizations, such as the Roman Catholic Church.

There is no cap in California. And California legislators gave victims of decades-old sexual abuse one year, 2003, to sue the church and other employers for the negligent hiring, retention and supervision of known or suspected child molesters.

Mahony’s lawyers, however, have threatened to challenge -- all the way to the U.S. Supreme Court if necessary -- the constitutionality of the law that established that one-year window. The attorneys have also argued that the church is exempt from the negligence claims under its 1st Amendment protections.

Negotiators have discussed the only case to go to trial in California. A Stockton jury awarded two brothers $3 million apiece in compensatory damages plus $24 million in punitive damages based on evidence that the diocese knew that one of its priests, Oliver Francis O’Grady, was a child molester before moving him over the years to other parishes, where he sexually abused more children. The trial judge later reduced the verdict to $13 million.

Punitive damages are not covered by insurance. In the Stockton case, the diocese paid $7 million, and plaintiffs’ lawyers are suing the church’s insurers to try to collect the remaining $6 million.

At least one carrier, Chicago Insurance Co., has already said it might try to protect its assets by asserting that the Los Angeles Archdiocese intentionally put children in harm’s way, according to court documents.

The companies also may argue that the Los Angeles and Orange dioceses broke their insurance contracts by allowing known pedophiles to remain in active ministry.

As a condition of writing insurance, some companies had required the church to notify them of child molestation allegations against priests so the firms could stop liability coverage for claims filed up to five years after such notification, according to court documents.

Chicago Insurance is the first carrier to have declared that a policy written for the Los Angeles Archdiocese was exhausted, after a $25,000 payout to settle a clergy sexual abuse case. Mahony’s lawyers disagree. They say the church would not have paid $29,000 for the 1974 policy if it was worth less than it cost. A judge will decide that dispute.

Meanwhile, state appellate justices have stopped Los Angeles County Superior Court Judge Peter D. Lichtman, who has presided over the L.A. and Orange dioceses’ settlement talks for nearly two years, from disclosing the dollar value he has placed on claims of clergy sexual abuse.

Attorneys for the insurers asked the 2nd District Court of Appeal in June to keep secret the amount that Lichtman believed the sex-abuse cases would be worth if a jury heard all the evidence. That case is pending.

Even if all parties reach agreement on how much money is available for a settlement, an arduous task would remain: comparing and placing a value on the individual claims.

Shirl Giacomi, a top administrator for the Orange Diocese, said the cost of settling the cases there would vary depending on the extent of the physical and emotional abuse suffered by the individual victim.

“Do I think all 60 cases are worth that? No,” she said, referring to Boucher’s demand of $3.1 million per claimant.