San Diego Roman Catholic diocese facing yet another lawsuit — from its insurance company

The insurance carrier for the Roman Catholic Diocese of San Diego filed a lawsuit Friday contending that because the diocese violated the terms of its insurance policies, the company should not have to pay out any money to settle claims from hundreds of people alleging they were victims of sexual abuse by clergy over the last several decades.

The lawsuit was filed in San Diego federal court by Catholic Mutual Relief Society of America, the insurance provider for San Diego and other Catholic dioceses. The company wants a judge to order that it has no duty to “defend or indemnify” the diocese or any parish against claims of sexual abuse by clergy from 1958 through 1990.

It is not clear why the lawsuit gives that time frame. The lawyer for Catholic Mutual did not respond to messages seeking comment Friday.

However, many of the 400 claims that are currently pending in San Diego Superior Court allege clergy abuse in the 1960s, 1970s and 1980s, said Irwin Zalkin, the lawyer representing more than 100 claimants.

The company is arguing that insurance policies in place years ago effectively capped how much could be paid out. It says the diocese knew during those years that some clergy members “had proclivities toward sexual abuse of children such that coverage is precluded” under the policies that were in effect then.

The suit also says the terms of the insurance policies were violated last month when Cardinal Robert McElroy wrote a letter to parishioners on Feb. 9, announcing that the diocese may have to file for bankruptcy because of the sexual abuse claims. The following day at a news conference, Kevin Eckery, the diocese’s director of media and community relations, told reporters that the claims could cost the diocese $550 million.

Those statements were made without consulting with the insurance company, violating the “duty to cooperate” under the policy and “effectively placed an unreasonable baseline on the value on the potential settlement value of these claims,” according to the lawsuit.

The lawsuit filing caught the diocese off guard. Eckery said Friday that it was a surprise and that the diocese was disappointed the insurance company sued.

“We will be opposing this in court,” he said.

The suit is the latest legal woe facing the diocese, which has 93 parishes and some 1.6 million congregants in San Diego and Imperial counties.

The clergy abuse lawsuits were made possible by AB 218, a state law passed in 2019 that opened a three-year window for people alleging they were victims of abuse to file claims, long after the normal legal deadline had elapsed.

The suits are all coordinated in a single action under a judge in downtown Superior Court, though the exact number of claims isn’t known. A spokesperson for the court said it does not track nor have a running tally of the number of clergy abuse cases that have been filed.

In 2007, facing a similar, but smaller, wave of claims, the diocese also sought bankruptcy protection, but its petition was dismissed after a settlement was reached in which the diocese paid out $198 million. The lawsuit Friday said Catholic Mutual contributed $75 million to that settlement.

After McElroy’s letter, Zalkin filed a new lawsuit, alleging the diocese had committed fraud when it transferred hundreds of real estate properties from the diocese to individual parish corporations. The transfers occurred in late 2019 and early 2020 when AB 218 was pending and then signed into law.

The Feb. 21 suit says the transfers were intended to dilute assets in the diocese’s name, thereby lowering the potential amount of money available in any settlement. The diocese denied that and said the properties had always belonged to the churches and were being held in trust by the diocese. The transfers were intended to formalize that relationship.

Zalkin said the lawsuit filed by Catholic Mutual was “posturing” and intended to rattle both the diocese and the alleged victims.

“They are trying to suggest that to the extent that plaintiffs are looking to the insurer to cover these claims, there is going to be limits, and it’s not going to be what they contributed in the past,” Zalkin said. “They are just trying to shake things up and fire a shot across the bow of everyone.”

San Diego is not the only diocese pondering a trip to bankruptcy court. The diocese of Santa Rosa, facing about 130 claims, has said it will file bankruptcy. And on Sunday the bishop in the Sacramento Roman Catholic diocese said it, too, may have to consider bankruptcy because of more than 200 clergy abuse lawsuits filed there.