Trial set to consider approval of Boy Scouts bankruptcy plan

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FILE - Sign with logo for Boy Scouts of America in the Silicon Valley, Foster City, California, April 11, 2020.

DOVER, Del. - More than two years after the Boy Scouts of America sought bankruptcy protection amid an onslaught of child sex abuse allegations, a judge will determine whether to confirm its proposed reorganization plan in a trial beginning Monday.

The trial in U.S. Bankruptcy Court in Delaware is expected to stretch over several weeks as attorneys and witnesses battle over a host of complex issues, including insurance rights, liability releases, the value of some 80,000 child sex abuse claims and how such a huge number of claims came to be filed.

The Boy Scouts, based in Irving, Texas, sought bankruptcy protection in February 2020 in an effort to halt hundreds of individual lawsuits and create a fund for men who say they were sexually abused as children involved in Scouting. Although the organization faced 275 lawsuits at the time, it found itself the subject of more than 82,000 sexual abuse claims in the bankruptcy case.

The reorganization plan calls for the Boys Scouts and its roughly 250 local councils to contribute up to $786 million in cash and property and assign certain insurance rights to a fund for abuse claimants. In return, the BSA and councils would be released from further liability.

The BSA’s two largest insurers, Century Indemnity Co. and The Hartford, would contribute $800 million and $787 million, respectively, into the compensation fund. Other insurers have agreed to contribute about $69 million. The organization’s former largest troop sponsor, the Church of Jesus Christ of Latter-day Saints, commonly known as the Mormon church, has agreed to contribute $250 million for abuse claims involving the church. Congregations affiliated with the United Methodist Church have agreed to contribute $30 million.

The troop-sponsoring organizations and settling insurers also would be released from further liability in exchange for their contributions.

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All told, the compensation fund would total more than $2.6 billion, which would be the largest aggregate sexual abuse settlement in U.S. history. The average recovery per claimant, however, would be significantly less than in other settlements of sex abuse scandals involving large numbers of victims. The University of Southern California, for example, agreed last year to an $852 million settlement with more than 700 women who accused a longtime campus gynecologist of sexual abuse.

The BSA’s plan faces objections from several opponents, including the bankruptcy trustee, who acts as a watchdog in such cases to ensure compliance with U.S. bankruptcy code.

Opponents argue, among other things, that the proposed liability releases for non-debtor third parties — including local BSA councils, insurers and troop-sponsoring organizations — violate the due process rights of abuse claimants and are not authorized under the bankruptcy code.

Several insurers that have not settled maintain the procedures for distributing funds to abuse claimants violate the insurers’ rights under policies they issued and would allow payment of claims that would not win damages in civil lawsuits.

The trial comes just over a month after the Boy Scouts announced a settlement with the official abuse claimants committee in the case. The committee was appointed by the U.S. bankruptcy trustee to represent the best interests of all sexual abuse survivors.

The official committee had long maintained that the BSA’s plan to compensate abuse victims was "grossly unfair," but said last month that it had won important concessions in lengthy negotiations with the BSA and other parties.

The revised plan, for example, provides abuse claimants the ability to sue insurance companies and local troop-sponsoring organizations, such as churches and civic groups, that do not enter into settlements within one year of the reorganization plan taking effect. It also includes enhanced child protection measures for Boy Scouts going forward and provisions to ensure independent governance of the compensation fund.

A previous version of the BSA’s plan garnered support from about 73.5% of 53,596 claimants who voted on it. The judge allowed a second round of voting, which ended last Monday, so claimants could consider the plan changes. Those results showed 56,536 claimants submitted ballots, with 85.7% voting to accept the plan.