Child Abuse Claims Lead Buffalo Diocese into Bankruptcy

(Bloomberg) -- The Diocese of Buffalo, New York, filed for Chapter 11 bankruptcy protection, citing child abuse lawsuits that resulted in financial uncertainty.

New York State passed legislation in January 2019 that modified the statute of limitations on child abuse claims, allowing for a one-year window for victims to take civil action.

Since the yearlong window opened in August, approximately 250 lawsuits have been filed against the diocese under the legislation, known as the Child Victims Act (CVA). The diocese anticipates that more than 400 individuals may assert abuse claims before the window closes, according to court papers.

“The Diocese is a not-for-profit religious corporation with limited resources, including limited insurance coverage which may be applicable to claims of persons seeking remedies under the Child Victims Act,” said Reverend Peter J. Karalus in a bankruptcy declaration. “It cannot allow any single plaintiff to recover a disproportionate share of the limited funds available from the Diocese simply because the plaintiff’s case goes to trial first.”

Dioceses across the U.S. have used bankruptcy to divvy up claims among victims while protecting as much of their assets as possible. This month, the Roman Catholic Diocese of Harrisburg in Pennsylvania also filed for bankruptcy. New York State has eight Catholic dioceses, including the one in Buffalo.

The Buffalo diocese listed liabilities of as much as $100 million and assets of no more than $50 million in its bankruptcy petition.

M&T Bank is the diocese’s largest unsecured claimant, with $1.6 million loaned. The remainder of the largest unsecured claims, which each amount to $100,000, are tied to individual claims under the CVA. Individual names have either been redacted or are listed only with initials.

The case is The Diocese of Buffalo, N.Y., 20-10322, bankruptcy court for the Western District of New York (Buffalo).

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