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Duluth diocese settles with final insurer: Victims stand to receive more than $30 million from 5 settlements

The Catholic Diocese of Duluth, headquartered at 2830 East Fourth Street in Duluth, filed for bankruptcy on Monday. The diocese covers ten counties in northeastern Minnesota. Steve Kuchera / Forum News Service

DULUTH — The Diocese of Duluth entered into an agreement this week that would end years of litigation over insurance coverage and provide more than $30 million to victims of child sexual abuse.

Liberty Mutual Insurance Company agreed to pay $6.5 million under a settlement agreement filed this week in U.S. Bankruptcy Court. It is the fifth and final insurer to settle with the diocese, which filed suit in 2016 to force coverage of claims in its ongoing bankruptcy.

A committee representing the claimants must still vote on the proposed settlement. Bankruptcy Judge Robert Kressel is expected to approve the agreement at a March 7 hearing, barring any objection.

Officials said the proposed settlement marks an important milestone in the effort to compensate the 125 people who have filed abuse claims and allow the diocese to emerge from bankruptcy protection after more than three years.

“We hope the bankruptcy judge approves the settlement, which depends in part on whether attorneys for the victims have any objections,” said Deacon Kyle Eller, diocese spokesman. “Although there are additional issues for resolution, settlement with the last insurance carrier would mean significant progress toward final resolution and our goal of providing compensation to those who have been hurt as a result of sexual abuse by clergy in our local church.”

Mike Finnegan, an attorney at St. Paul-based Jeff Anderson and Associates, which represents most of the victims, agreed.

“Once that is done, all the insurance will be resolved and then the last piece that remains is negotiation with the diocese, and that’s been ongoing,” he said. “(We) and the diocese are working hard to get that last piece over the finish line and get the whole thing resolved.”

The diocese has been under Chapter 11 bankruptcy protection since December 2015, when it filed a voluntary petition in wake of a $4.9 million jury verdict in the first case to go to trial under the Minnesota Child Victims Act, which opened a window for survivors of decades-old abuse cases to file suit.

The insurance lawsuit came six months later, significantly slowing the progress of the bankruptcy proceedings. The abuse claims date as far back as the early 1940s, prompting review of historical policies and challenges to each insurer's alleged coverage responsibilities.

The four other insurance settlements have been reached and approved without objection.

Continental Insurance Company is providing $15 million, nearly half of the total funds. Catholic Mutual Insurance Company agreed to pay $8.95 million and Church Mutual Insurance Company is contributing $250,000 to victims.

A $975,000 settlement with Firemen’s Fund Insurance Company was approved for the diocese to cover legal fees and other expenses involved in pursuing the insurance litigation.

Representatives of both the diocese and victims have said that securing strong participation from the insurers is integral in reaching a mutually acceptable reorganization plan.

In the Twin Cities, more than 400 victims benefited from a $210 million compromise approved by Kressel in September, nearly four years after the Archdiocese of St. Paul and Minneapolis filed for bankruptcy. Insurers contributed $170 million, while the archdiocese paid $40 million.

Finnegan said approval of the final insurance settlement in the Diocese of Duluth case should accelerate matters, though he would not put a timeline on a final reorganization plan.

“Both sides — the diocese and the survivors — want to do everything they can do to get this done as soon as possible and as fairly as possible,” he said.

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