Baltimore archdiocese bankruptcy nears critical mediation phase following last-minute deal with insurers

The Archdiocese of Baltimore’s bankruptcy case moved closer to the critical mediation phase Monday, as attorneys for the Catholic church, its insurance carriers and a committee of sex abuse survivors reached a tentative agreement on the terms for upcoming negotiations.

The agreement is tentative because the lawyers still need their clients’ approval for a last-minute detail hashed out in the hallways outside of the U.S. Bankruptcy Court in Baltimore: Whether the archdiocese will drop its breach-of-contract lawsuit against its insurers, and what the survivors’ role would be should they choose to refile it later.

Scheduled for a contested hearing Monday, attorneys in the case settled their differences in time to avoid debating legal issues in court. After being briefed on the tentative agreement, U.S. Bankruptcy Judge Michelle M. Harner credited the lawyers for “creating a mediation structure that’s acceptable to all.”

During mediation, attorneys and their clients get together with independent mediators to negotiate the amount of money the archdiocese and its insurers each have to contribute to settle survivor claims, as well as an eventual reorganization plan for the church featuring protocols designed to prevent the scourge of clergy sexual abuse from happening again.

The tentative agreement reached Monday would allow the archdiocese’s insurers to jointly nominate a third mediator, in addition to the two already proposed by the church and the survivors committee: Robert J. Faris, chief judge of the U.S. Bankruptcy Court in Hawaii, and attorney Brian J. Nash, an attorney who specializes in mediation.

Attorneys would be able to challenge the mediator proposed by the insurance companies.

Baltimore’s diocese, America’s oldest, declared bankruptcy Sept. 29 , two days before Maryland’s Child Victims Act took effect. That law lifted previous time limits for people who were sexually abused as children to sue their abusers and the institutions that enabled their torment.

Legislators passed the child victims law following the release of a state attorney general report which found that 156 clergy and other officials in the Baltimore diocese tormented more than 600 children and young adults, dating to the 1940s. The abuse spanned the diocese’s jurisdiction, which covers Baltimore and nine counties in Central and Western Maryland.

When the archdiocese declared bankruptcy, survivors who planned to sue the church had to repurpose their stories into claims in the bankruptcy proceeding. Harner set a May 31 deadline for survivors to file. That deadline came and went with hundreds of claims being filing in the case , though the exact number has not been disclosed publicly.

Baltimore Archbishop William Lori recently struck a unified tone with leader of the survivors committee, Paul Jan Zdunek, but tensions remained with the church’s insurance companies.

The church sued its insurers alleging breach of contract for failing to cover, or indicating they would not provide coverage for, claims of sexual abuse of minors. The survivors’ committee, which was also at loggerheads with the insurance companies, sought standing in that lawsuit. The insurers pushed back on the committee’s request at the same time it sought to argue the lawsuit, asking for the complaint to be moved from bankruptcy court to the U.S. District Court in Baltimore.

That lawsuit still was pending as of Monday, but the archdiocese tentatively agreed with insurers to dismiss the complaint. They reserved the right to file suit again and, if they do, the attorneys tentatively agreed that the survivors’ committee would have standing in that case. The details over the lawsuit were the one item attorneys had to consult their respective clients with.

Which of the archdiocese’s insurance policies were applicable to the sexual abuse at the time it occurred — and how much money those companies are on the hook for — will be subject to mediation. The church and survivors’ committee each hired expert insurance lawyers to examine the policies, which are numerous.

Edwin Caldie, an attorney for the survivors’ committee, said in court Monday that the tentative mediation agreement the church and committee struck with insurers was the subject of great “cooperation” and “candor,” adding that the dialogue “created more trust and a bit of hope for the mediation process.”