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Brooklyn diocese sues Royal runoff operation over alleged waste


The Roman Catholic Diocese of Brooklyn has filed suit against the runoff operation of Royal & SunAlliance USA Inc. and its directors and officers in state court in North Carolina, contending its owners’ alleged waste of hundreds of millions of dollars in executive salaries and other expenses has threatened its ability to pay potential liability costs related to child abuse claims.

RSA USA’s sale to Charlotte, North Carolina-based Arrowpoint Capital Corp., a vehicle established by its RSA USA’s management team, was approved by the Delaware insurance commissioner in 2007, followed by its going into runoff. 

The diocese, a policyholder of Arrowpoint unit Arrowood Indemnity Co., formerly known as Royal Indemnity Co., had purchased numerous primary and excess commercial general liability insurance policies between 1956 and 2000, according to the lawsuit filed in Charlotte in The Roman Catholic Diocese of Brooklyn, New York v. John Tighe et al. 

In 2019, then New York-Gov. Andrew Cuomo signed into law the New York Child Abuse Act, which extended the statute of limitations for child abuse victims to file claims and led to the diocese receiving more than 500 such claims, according to the litigation.

The lawsuit charges that the defendants “wrongfully manipulated” Arrowood’s statutory financial results, which allowed the company to divert “well over” $500 million over the last “ten-plus” years, causing it to become statutorily impaired and threatening its ability to comply with its policyholder obligations.

The lawsuit, which says the diocese is one of hundreds of Arrowood policyholders, charges the defendants “have systematically and wrongfully transferred from Arrowood hundreds of millions of dollars under the guise of grossly bloated salaries, deferred compensation plans, management fees, expenses, health plans, and pension plans.”

It says the defendants’ actions mean the diocese will be unable to entirely comply with its defense and indemnity obligations, and it will at best receive pennies on the dollar for the insurance coverage to which it is entitled.

The lawsuit, which was filed last week, charges the company with unfair or deceptive acts, among other charges, and seeks at least $500 million in damages and creation of a constructive trust to recover funds taken from the insurer.

An Arrowpoint spokeswoman had no comment.