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Boy Scouts seek bankruptcy protection to structure abuse claims

Boy Scouts chapter 11

The Boy Scouts of America sought Chapter 11 bankruptcy protection Tuesday as part of an effort to structure compensation payments to victims of sexual abuse harmed while scouting.

The organization retains significant liability insurance limits for years when the alleged abuse took place, according to the bankruptcy filing.

The Boy Scouts will create a Victims Compensation Trust to compensate victims, according to a statement from the Irving, Texas-based youth organization.

Local councils, which provide programming, financial, facility and administrative support to scouting units in their communities, have not filed for bankruptcy. The councils are legally separate and financially independent from the national organization, the statement said.

The statement did not detail how the trust would be funded. An email from a Boy Scouts representative did not give further details on the trust, which is expected to fund payments for abuse that in many cases took place decades ago.

According to the bankruptcy filing, the Boy Scouts has bought commercial general liability coverage since 1962 from multiple insurers.

“While the amount of coverage remains substantial in many years, the insolvency of certain insurers and the resolution of sexual-abuse and other claims have either eroded, eliminated, or exhausted the liability limits for certain policies,” the filing states.

From 1962 to 1982, the coverage was on a per-occurrence basis, but aggregate limits were introduced in 1983, according to the filing. From 1985 through 2018, the organization bought fronting policies, where the deductible matched the policy limit.

“In addition, beginning in late 1990, the (Boy Scouts) procured significant insurance with limits of liability exceeding $100 million. In 2019, the (Boy Scouts) reverted to traditional insurance and expects to continue with such insurance in 2020,” the bankruptcy filing states.

According to information on the Boy Scouts website, for 2018-2019 the organization was self-insured for the first $10 million of its general liability exposure, but the general liability program does not provide coverage for intentional and/or criminal acts.

The Boy Scouts sued units of Hartford Financial Services Group Inc. in June 2018 over insurance coverage for about 200 alleged sexual abuse claims. Hartford units had provided general liability and excess coverage to the Boy Scouts from 1970 to 1988, according to the suit, but “refused and continues to refuse to satisfy its coverage obligations, including by denying coverage for both defense costs and indemnity payments.”

The Boy Scouts sought damages of not less than $13.5 million, as well as legal costs, the suit said.

In a July 2019 response, Hartford said over the past decade it had settled several disputes with the Boy Scouts over the scope of the coverage. Disputes over remaining coverage include the issue of the number of occurrences, notice of claims and expectation of injury, according to a Hartford filing in the case.

According to court filings, the case was transferred to another judge in August.

Hartford did not respond to a request for comment.

The Boy Scouts of America is represented in the restructuring by Sidley Austin LLP as legal counsel and Alvarez & Marsal North America LLC, as a financial advisor.