Insurer refuses to reimburse settlements over church sex abuse
The knock on Keith Claffey’s window caught him off guard.
He had just pulled into his driveway after a grocery trip when he heard a light rap on glass. An Amazon delivery, he wondered? The clipboard-carrying man outside his car did have something to deliver, but it was an unpleasant surprise: a subpoena by an insurance company ordering him to testify at a federal trial.
The insurer wanted to ask Claffey a question in court about a traumatic experience from his childhood: When had he first told church officials that, beginning at age 11, he had been repeatedly molested by a priest?
His answer could help determine whether Interstate Fire & Casualty Co. must reimburse the Archdiocese of Hartford for more than $1 million it paid to settle sexual abuse cases against several priests. At issue: whether the church is entitled to insurance coverage for abuse it should have known was likely to occur. Interstate is refusing to cover the settlements.
“Why am I getting dragged back into this more than 30 years later?” said Claffey, 54, who grew up in Bloomfield, Conn., and lives in Maplewood, N.J. “It definitely brought a lot of it all back, and the thought of going through that in open court would be horrifying.”
Since the 1950s, the Catholic Church has paid an estimated $3 billion in clergy sex abuse settlements, according to the US Conference of Catholic Bishops, some of which was covered by liability insurance that protects dioceses from lawsuits. Occasionally there are disputes over whether claims should be covered, and those legal battles are usually resolved privately or in court proceedings that receive little public notice.
But the case before US District Judge Janet Bond Arterton in Hartford is unusual not only because it has gone to trial, but also because it has ensnared a victim who had hoped not to revisit the past. Rarely are survivors drawn into these legal actions, and Claffey’s experience is raising concerns that it may discourage other survivors from coming forward.
“If other plaintiffs or victims see that people like me are getting called back decades later to go to court,” said Claffey, “it’s just another reason for them not to want to say anything.”
A lawyer representing the Hartford Archdiocese, Elizabeth Stewart, declined to comment, saying “I’m really uncomfortable talking about the case when it’s in the hands of the judge.” Sabrina Glavan, a spokeswoman for Chicago-based Interstate, a subsidiary of the German insurer Allianz SE, also declined to comment, saying the firm was advised not to by its lawyers.
Church insurance fights are often complicated debates involving abuse from decades ago and expired insurance policies that are just as old. The Interstate coverage in question, for example, dates from 1978 to 1985. In a further complication, some policies apply to the time period in which the abuse occurred, while others cover the period in which it was reported, which could be many years later.
When insurers deny coverage, they usually cite a range of reasons, from church officials failing to provide adequate paperwork to having insufficient evidence of old policies. But most cases hinge on whether church leaders “expected or intended” the abuse to happen, since the church’s history of shuffling known abusers from parish to parish created a trail of victims.
“If you boil their argument down, they’re essentially saying that the bishops back then knew about this risk,” said Mike Finnegan, a Minnesota lawyer who has handled numerous clergy sex abuse cases, “and their insurance policies were only covering risk they didn’t know about.”
That’s a key issue in the Hartford lawsuit, which stems from Interstate’s refusal to reimburse the archdiocese for settlements it paid between 2010 and 2012 to four victims of three priests, even though Interstate reimbursed previous settlements involving priests in the Hartford Archdiocese. The three priests are the Rev. Stephen Crowley, who retired in 1991 and could not be reached for comment, the Rev. Robert Ladamus, who died in 2012, and Claffey’s abuser, the Rev. Ivan Ferguson, who died in 2002.
According to Claffey, Ferguson, then a teacher at Northwest Catholic High School in West Hartford, Conn., began abusing him in 1973. In spring 1978, Claffey says, he told another priest about the abuse but no apparent action was taken. The Hartford Archdiocese contends it was not notified of Ferguson’s misconduct until March 1979, but Interstate says an internal church memo contradicts that.
Resolving when the church learned of Ferguson’s misconduct could determine whether it is entitled to insurance coverage for abuse that occurred after that date.
Ferguson was removed from the school in 1979 and treated for alcoholism, but he was later reassigned to two other schools, where additional abuse allegations against him were made, according to court records.
Claffey filed a lawsuit against the archdiocese in 1996, was deposed in 1997, and received a settlement in 1998. In 2010, he was deposed again in a case involving Ferguson and a different victim. Interstate requested those deposition transcripts in its subpoena to him.
After receiving the subpoena, Claffey said, “at first I was like, ‘sure, I’ll help in any way I can.’ ” But then he grew uneasy, wondering whether his testimony could disadvantage other victims. After all, he reasoned, the church may be more likely to pay future settlements, and in larger amounts, if it expects insurance to cover some or all of those costs.
“No victims want to make it tougher for those who come behind,” said David Clohessy, executive director of the Survivors Network of Those Abused by Priests, “and testifying on behalf of an insurance company might make church officials less likely to settle cases in the future, or make smaller settlements, claiming they don’t have the funds to do right by a victim . . . and that’s a terrible position to put survivors in.”
The money at stake is considerable. In Hartford, the archdiocese paid $22 million in 2005 to 43 people sexually abused by priests, of which about half was covered by insurance and savings. The Bridgeport Diocese paid $37.7 million between 1953 and 2003 to settle 89 claims; 40 percent of that was covered by insurance. Of the $127.4 million the Boston Archdiocese had paid to settle abuse allegations through June 2005, $43.4 million of that was covered by insurance.
Finnegan, the Minnesota lawyer, said insurers are increasingly denying clergy sex abuse claims, in part because many states are widening the window of time in which victims can file complaints. That creates more potential financial liability for churches and insurers.
“The risks for insurance companies have gone up dramatically as more people have come forward, and that’s more reason for them to fight,” Finnegan said. “They’re doing anything they can to not pay on those claims.”
Many insurers stopped covering clergy sex abuse claims in the 1980s, when large-scale abuse cases, such as by the Rev. Gilbert Gauthe in Lafayette, La., led to massive settlements — and massive insurance losses. Some insurers do cover sexual misconduct but charge higher premiums for the coverage.
Because of the increasing expense and difficulty of getting insurance, many dioceses are now covered by Catholic Mutual, a nonprofit that provides self-insurance of sorts, while still fighting with their previous insurers over older claims.
Insurance companies aren’t playing hardball only with the church. In the Penn State child sex abuse scandal, the university’s insurer is balking at covering payments to former coach Jerry Sandusky’s victims on grounds that school officials allegedly knew of his abuse as early as 1976.
Interstate has also been sued in other states for failing to reimburse clergy sex abuse settlements and in at least one case has prevailed: The US Court of Appeals for the 9th Circuit in San Francisco ruled in 2014 that Interstate’s policy for the Diocese of Phoenix did not cover abuse payments due to the policy’s assault and battery exclusion.
The Diocese of Honolulu filed a similar suit against First Insurance Co. of Hawaii in January. A 2014 lawsuit against several insurers by the Archdiocese of St. Paul and Minneapolis was put on hold after it filed for bankruptcy last year.
Cindy Robinson, a Bridgeport, Conn., lawyer who represents clergy sex abuse victims, dismisses concerns that dioceses might cry poor if courts increasingly rule against them.
“Most churches we deal with have other means of fulfilling judgments if they need to, such as selling property or other assets,” she said. “It seems they have the wherewithal to pay.”
Funding for the Boston settlement, for instance, also came in part from selling the cardinal’s residence and 43 surrounding acres to Boston College for about $100 million.
In Claffey’s case, on the day in late April he was to testify, Interstate said he wasn’t needed in court after all, leaving him feeling relieved, but also with “a sense of incompletion,” he said. The trial ended several days later and the case now awaits a ruling by the judge.
Despite Claffey’s eleventh-hour reprieve, Robinson is dismayed that a survivor was even asked to testify.
“It’s really rotten for a victim to have to do that, and kind of outrageous,” she said. “The insurance company is using them as their sword.”