Historic Bankrupcty Settlement in Diocese of Rochester

The Committee of Unsecured Creditors and the Diocese of Rochester have reached a Restructuring Support Agreement that is historic in its scope.  While the initial settlement of $55 million is modest in terms of the number of survivors and the trauma they endured as children, the additional provisions garnered by the creditors is unprecedented.

These include the ability for survivors to pursue additional assets from the insurance companies. The deal also calls for non-monetary commitments from the diocese, such as child protection measures and disclosure of secret documents.  While the $55 million will be placed in trust for survivors of sexual abuse in the Diocese of Rochester, these same survivors are free to pursue claims against the Diocese's insurance companies which have been at the center of the contentious negotiations in the federal bankruptcy process.

According to a diocesan Frequently Asked Questions document on the RSA filing, the trust also is expected to receive “potential additional recovery for the benefit of survivors” from insurers that covered the diocese, parishes and related Catholic entities at the time abuse occurred.

Among the key terms and conditions of the reorganization plan, as outlined in the RSA, are the following points:

  • A trust created for the exclusive benefit of the holders of sexual-abuse claims. A trust advisory committee, initially comprising members of the creditors’ committee, also would be formed.
  • The $55 million contribution to the trust by the diocese, parishes and other related “participating parties” to fund the payment of sexual-abuse claims.
  • Diocesan and related-party contributions to the trust supplemented by insurance settlements, claim proceeds, litigation awards and other sources.
  • A “channeling injunction” directing state-court sexual-abuse cases against diocesan parishes and affiliated Catholic entities to the trust “as the sole and exclusive remedy for all holders of channeled claims.” In September, attorney Timothy P. Lyster told the Catholic Courier that such a channeling injunction would relieve parishes and other related Catholic entities from ongoing exposure through litigation in state court.
  • A permanent injunction staying prosecution of sexual-abuse claims against the diocese, the parishes and affiliated Catholic entities.
  • Creation of a protocol for the allocation of the sexual abuse claims settlement fund consistent with the terms of the RSA.

The Diocese of Rochester was the first Catholic diocese to declare bankruptcy but was soon followed by the Diocese of Syracuse, Buffalo, and Rockville Centre.  The Diocese of Rochester bankruptcy settlement exposes the church's insurance companies in bankruptcy proceedings and may lead to more creative settlement structuring in the future. 

Kudos to the brave survivors in the Diocese of Rochester.  Their tenacity and patient negotiating led to a historic settlement that may well affect other church bankruptcy settlements in the future.

Categories