Boy Scouts Insurance Fight Complicates Deal to Pay Victims

A dispute over whether a unit of insurance giant Chubb Ltd. must contribute to a trust fund for sexually abused Boy Scouts is complicating talks to end the youth group’s bankruptcy case.

Lawyers for more than 80,000 people who say they were abused as Boy Scouts are negotiating how much, if anything, Century Indemnity can contribute to the trust fund. Century is no longer actively selling policies and is using all of its assets to pay claims. 

Victims’ lawyers, concerned that Century may claim it can’t pay abuse victims, argue that a related Chubb subsidiary, Insurance Company of North America, known as INA, is also on the hook because it insured the Boy Scouts until about 1996. Chubb argues that INA turned over those policies to Century during a restructuring that year. 

“What the INA insurance rights are worth is important,” victim lawyer Eric Goodman said in court Monday afternoon. Should Century and the victims fail to strike a deal, there will be a fight over how much Century can contribute and whether INA and Chubb must also pay out under the policies, Goodman said.

Century’s policies could cover billions of dollars worth of claims filed by about 16,000 abuse victims, Kirk Pasich, an attorney for the main victims’ committee said in court Monday. Those claims are covered by policies from the 1950s through the 1970s, Pasich told U.S. Bankruptcy Judge Laurie Silverstein.

If creditors, including abuse victims, vote to reject the Boy Scouts’s payout plan, Silverstein would be forced to decide whether to approve the reorganization anyway under so-called cram-down rules, Goodman said.

“I hope that we’re not in the cram-down world, but we could be,” Goodman said.

Victims, insurers and the Boy Scouts have been making progress on the payout plan and may “have news to report” in a few days, Boy Scouts lawyer Jessica Lauria said told Silverstein during the hearing.

The Boy Scouts are scheduled to be in court next month to seek approval of a disclosure statement that would be used by creditors, including abuse victims, to decide whether to vote in favor of the payout proposal. That statement will include how much money each group of creditors may recover should the plan be approved.

A committee representing abuse victims has agreed to an $850 million settlement with the Boy Scouts that includes a to-be-determined amount of money from Century. 

Insurers have accused victim lawyers of inflating the number of claims in order to gain a super majority in the creditor voting process. Century and Hartford Accident and Indemnity Co. won court permission to collect information about a marketing campaign that the insurers say pushed the number of claims from more than 1,400 at the start of the Boy Scouts bankruptcy in February 2020 to over 95,000 a year later.  

Silverstein declined to force Century or Chubb to turn over additional financial settlement details demanded by victim lawyers, siding with the insurance companies. She said the request appeared to be an effort by the victims to get an edge in mediation.

Instead, she urged the two sides to continue negotiating.

“I understand you’re in mediation. Keep mediating,” she said. 

The case is In re Boy Scouts of America, 20-10343 U.S. Bankruptcy Court, District of Delaware (Wilmington).

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.