Insurance firm sues Buffalo Diocese to avoid paying for sex abuse claims

Oct. 11--A Chicago-based insurance company has launched an opening salvo in what are expected to be bruising legal battles between the Buffalo Diocese and its insurers over payouts on clergy sex abuse claims under the Child Victims Act and the legal costs of defending the diocese against the claims.

Continental Insurance Company is arguing in court papers that insurance policies it may have issued to the diocese more than 40 years ago don't apply to childhood sex abuse lawsuits being filed now against the diocese.

Potentially millions of dollars in legal costs and sex abuse claims are at stake in the case.

Continental urged the court to rule that the company was not obligated to pay for sex abuse claims or for the diocese's legal costs in defending itself against the claims. The insurer also argued that it wasn't obligated to provide funds to help offset the expenses of the diocese's voluntary compensation program, which already paid $17.5 million to 106 abuse victims.

Among other reasons, Continental lawyers argued that it shouldn't be forced into paying if, prior to the abuse, the diocese had "created a system of protecting, transferring, and obscuring the identities of pedophilic priests."

The company filed a summons and complaint last week in Erie County State Supreme Court, after the Buffalo Diocese notified Continental that it was planning to make a claim or multiple claims on three insurance policies from the mid- to late-1970s.

"What the insurance company is doing, because there's so much money at stake, because there's going to be so many claims that implicate their policy, they're proactively saying, 'Look, all these lawsuits against the diocese at the end of the day, we're going to be made to foot this bill and we shouldn't have to foot this bill because this type of conduct is not covered under the policy that they have,'" said Florina Altshiler, lead attorney with the Russo & Toner firm and an expert in insurance law.

The diocese is named as a defendant in about 170 lawsuits filed since Aug. 14, the start of a one-year window under the Child Victims Act that allows previously time-barred childhood sex abuse lawsuits to proceed in court. Most of the lawsuits allege sex abuse from several decades ago, as far back as 1948.

Bishop Richard J. Malone has said that the diocese and its advisers have been trying to track down whatever insurance policies it can from decades ago to assist in paying claims.

Four Child Victims Act cases filed on Aug. 14 against the diocese are specifically mentioned in the Continental complaint. In one of the cases, the Rev. Lehr Barkenquest is accused of repeatedly molesting a De Sales High School student from 1971 to 1975. Another case alleges four priests sexually abused a boy at separate times in eighth grade and high school from 1972 to 1974.

The diocese notified Continental that it had three policies with Commercial Insurance Company, a Newark underwriting firm that was merged into Continental. The policies were effective July 1, 1973 to July 1, 1976; July 1, 1976 to July 1, 1977; and July 1, 1977 to July 1, 1978.

While neither Continental, nor the diocese has found actual copies of those policies, the diocese provided Continental with "secondary evidence" that the insurer issued "certain commercial general liability insurance policies."

Continental contended that the policies or "alleged policies, to the extent they exist" did not provide coverage to the diocese for any liability that was not caused by an accident.

"It's a question of, 'Is there insurance coverage for intentional sex abuse?' The way I analyze the law I think the answer is, yes, there is, because intentional acts, based on how the courts have interpreted policy language, are covered," said Altshiler. "But what this insurance company is arguing is that no, they're not covered, and our policy language excludes it."

Altshiler said she doesn't know the specific Commercial Insurance Company policy language for the policy period in question, and the court's ruling will likely hinge on that language.

"The court would have to look at the policy and say, yes, sex abuse is covered, sorry insurance company you're going to have to pay at the end of the day, or actually, OK insurance company you're right, this type of conduct is outside of what your insurance was supposed to cover and, therefore, we're going to decide that you are not responsible," she said.

Most policies include a clause that voids the policy if there's misrepresentation by the party purchasing the policy, she said.

"With the diocese, there's the allegation that they were concealing this abuse," said Alshiler. "So, if the insurer can prove that the diocese concealed the abuse, they can then argue that the insurance policy does not apply because the policy is void."

Altshiler said other insurance companies notified by the diocese about claims also would likely file similar lawsuits.

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