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Spokane diocese sued by insurance carriers

As the Catholic Diocese of Spokane prepares to file for bankruptcy, it now faces an additional challenge: a lawsuit from its insurance company.

Five insurance carriers – all owned by CNA, a Chicago-based global insurance organization – filed a complaint for declaratory relief this week, asking a judge to determine how much they’re liable to pay under the diocese’s insurance policies.

The policies cover a period from 1976 to 1989, when many incidents of clergy sexual abuse allegedly took place. The vast majority of those claims involve Patrick O’Donnell, a Spokane priest who has admitted to abusing boys.

In the complaint filed Tuesday in Spokane County Superior Court, the insurance carriers dispute the definition of “accident” in the policies. The lawsuit points out that under Washington law, “an intentional act does not constitute an ‘accident.’ ” Based on that definition, the complaint states that the diocese’s alleged handling of complaints concerning O’Donnell were not “accidents” – which, unlike “intentional acts,” are covered by the policies.

The Rev. Steve Dublinski, the diocese’s vicar general, said the diocese disputes much of the information contained in the complaint. He added that the diocese was also dismayed by the carriers’ decision to file a lawsuit.

“We’ve been working with the insurance companies for over two years so we are disappointed with this action,” he said. “This puts the diocese and the claimants in jeopardy of not being able to fulfill that fair, just and equitable compensation.”

When the diocese files for Chapter 11 bankruptcy Dec. 6, its insurance policies will be considered among its assets. Dublinski said he doesn’t know how much the CNA policy is worth, but a person familiar with the situation estimates its value at $5 million to $7 million.

“Published reports, if true, complaints by children, parents and fellow priests, and O’Donnell’s own statements to diocesan authorities establish that the diocese was aware, at the highest levels, of O’Donnell’s propensities, pedophilia, actual misconduct and inability to control his behavior,” states the lawsuit. “The diocese made conscious decisions not to protect children in the diocese.”

The lawsuit also emphasizes the fact that several insurance policies from 1976 to 1980 are missing. In earlier interviews, diocese officials indicated that these policies were destroyed during a flood more than a decade ago. “Under Washington law, the diocese has the burden to prove the existence and terms of missing policies,” states the complaint.

The insurance carriers, in the lawsuit, also argue that the diocese failed to provide them with “timely notice” of the occurrences of abuse.

The insurance carriers that have filed the suit in Spokane County Superior Court are: Pacific Insurance Co., which issued general liability insurance to the diocese from 1976 to 1977; Columbia Casualty Co., from 1979 to 1980; American Casualty Co., from 1985 to 1988; Continental Insurance Co., from 1985 to 1988, and the Glens Falls Insurance Co., from 1988 to 1989.

Except for Glens Falls, whose policy bars coverage for claims related to sexual abuse, the companies have paid the cost of defending the diocese, according to the lawsuit. “The diocese has not demanded that its insurers settle many of these claims, waive their coverage defenses and accept the diocese’s positions on all disputed matters.”

Charles Boesel, spokesman for CNA, declined to comment on the lawsuit.

Five other insurance companies have chosen not to file lawsuits against the diocese, Dublinski pointed out. Four of those companies – Safeco, One Beacon, Indiana and Aetna – are named as defendants in the lawsuit, along with the victims who have filed lawsuits against the Diocese of Spokane.

“The hope was that it wasn’t going to come to this point,” Dublinski said, when asked why the diocese didn’t sue the insurance carriers two years ago when they hesitated to provide coverage in the first place.

“We believe the diocese has adequate assets with or without the insurance,” said Tim Kosnoff, one of the attorneys for the victims. “People have been hurt. Compensation has to be found from other sources.”

Like the 19 lawsuits filed by 58 plaintiffs alleging clergy sexual abuse, this lawsuit from the insurance carriers will be stayed when the Diocese of Spokane files for Chapter 11 reorganization.

“It will be dealt with by the bankruptcy judge,” Dublinski explained.