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Spokane Diocese, two insurers reach deal

FRIDAY, APRIL 21, 2006

Two insurance carriers have agreed to pay the Spokane Catholic Diocese a total of $4.25 million to settle priest sex-abuse claims.

Bishop William Skylstad said Thursday the proposed agreements were indicative of the momentum that has been building to resolve the diocese’s thorny Chapter 11 bankruptcy – now 16 months old.

Indiana Insurance Co. will pay the diocese $2.75 million, and Aetna Insurance Co. will pay $1.5 million. Neither company is acknowledging that it was obligated by insurance policies to cover the actions of priests who sexually abused children decades ago.

In a federal lawsuit, the diocese alleged that Indiana was its liability insurer from 1977 to 1979, and Aetna during 1981.

The proposed agreements follow the late-March deal the diocese struck with Safeco Insurance subsidiary General Insurance Co. for $5.25 million.

Together, the $9.5 million from insurers would help the diocese begin to meet its $45.7 million settlement offer to a group of 75 people who made initial sex-abuse claims against the diocese.

The offer to that group has been criticized by victims left out of the settlement and by the 82 Eastern Washington parishes governed by Skylstad.

If insurance settlements, the sale of property and donations don’t raise enough money to meet a payment of $27 million due in October 2007, parish churches and schools could be used as collateral for loans or sold outright.

The diocese, however, dismisses the notion of selling churches and schools to finance settlements.

“We have no intention of selling parishes,” Skylstad said during a press conference.

Diocese attorney Greg Arpin said the three insurance settlement proposals on the table are just a start.

Three other insurers, including Oregon Auto Insurance Co., CNA (an insurance conglomerate), and the Washington State Guaranty Association, which is covering the policies of defunct Home Indemnity Co., have yet to settle with the diocese.

They may have larger exposure than the other carriers, because policies purchased by the diocese cover the time periods when much of the sexual abuse against children occurred.

Skylstad wouldn’t speculate on how much more money might be expected in future settlements.

The insurers were dealt a setback in May when a motion for summary judgment was denied by Senior U.S. District Judge Justin L. Quackenbush.

A trial is scheduled for fall if the remaining three carriers and the diocese fail to reach an agreement.

The proposed settlements with Indiana, Aetna and Safeco would release those firms of all responsibility with one exception – the Morning Star Boys Ranch, which asserts it has insurance coverage to cover claims of sexual and physical abuse.

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