MILWAUKEE — Four years of negotiations between the Archdiocese of Milwaukee and several of its insurers have resulted in what attorneys for the archdiocese term “the linchpin to the plan (for reorganization)” in making a motion that Judge Susan V. Kelley approve settlement agreements and policy buy-back agreements as part of the archdiocese’s Chapter 11 reorganization.
In the motion, filed Wednesday, Dec. 17, in U.S. Bankruptcy Court for the Eastern District of Wisconsin, attorneys are asking approval of $10.3 million in settlements reached with Lloyd’s of London and other London Market Insurance Companies (LMI), OneBeacon Insurance Company, and Stonewall Insurance Company.
In providing background for the motion, attorneys stated, “The settlements did not come easily, especially because all of the archdiocese’s insurers denied any legal responsibility to pay abuse survivor claims.”
The motion noted that the settlements with the group – termed “setting insurers” – involved four separate mediations. In October 2013, LMI agreed to pay $8 million for a complete policy buy-back; in September 2014, Stonewall, and OneBeacon agreed to a cumulative agreement of $2.3 million for a complete policy buy-back.
In making its case for the court’s approval of the settlement, attorneys stated, “… if the settlements are approved, they will: (1) provide an immediate financial benefit to the estate and its creditors; (2) eliminate the uncertainty of litigation; (3) avoid the expenditure of the estate’s resources on expensive coverage and/or claims litigation; and (4) provide an economic benefit to the estate from the settling insurers.”
In summarizing the settlements, the motion noted that of the “settlement proceeds,” 50 percent would be paid as a “buy-back payment” and would be paid to the Insurance Litigation Trust for the benefit of abuse survivor claims.
The remaining 50 percent of the proceeds would be paid as a “plan payment” and used to defray the administrative expenses of the Chapter 11 case. As of Dec. 22, administrative expenses and professional fees totaled more than $16 million.
“All persons who now or may in the future hold claims against the settling insurers will release any and all claims relating to the policies,” the motion said. “This term is a deal-breaker for the settling insurers, whose primary concern in entering into the settlement was to prevent third parties from waiting until after the settling insurers paid the debtor (the archdiocese), and then asserting future claims against the settling insurers.”
In concluding its motion, archdiocesan attorneys wrote that approval of the settlement agreements “creates a pathway for confirmation (of the reorganization plan) rather than a pathway to further litigation.”
“In short, the proposed settlements will guarantee the debtor’s creditors vastly more than the debtor could have offered when the bankruptcy began and, if approved, the settlements will represent a remarkable value recovery from the series of coverage defeats that the debtor suffered after years of pre-bankruptcy litigation.”
Also on Dec. 17, John Marek, treasurer and chief financial officer of the Archdiocese of Milwaukee, filed a declaration of support for the motion for order approving settle agreements and buy-back agreements.
“I believe the settlements are in the best interests of the archdiocese and that the settlements are a sound business decision,” he wrote.
Marek noted that if the court does not approve the settlements, “confirmation of the debtor’s plan and the debtor’s ability to begin paying creditors could be substantially delayed.”
He continued, “Approval of the settlements will provide the debtor with funds to confirm a plan of reorganization in this bankruptcy case now, and allow the debtor to provide at least some immediate payment to claimants upon confirmation of the plan.”
Marek termed the settlements “in the best interest of the estate and its creditors.”
Kelley is scheduled to hold a hearing on the motion Tuesday, Feb. 10.
