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Diocese, insurer settle

The Catholic Diocese of Spokane announced a settlement Thursday with one of its liability insurers for $5.25 million – money that will be used to pay sex-abuse claims against the church.

The agreement with General Insurance Company of America, a subsidiary of Seattle-based Safeco Corp., is the first substantial settlement with an insurance company since the diocese filed for Chapter 11 bankruptcy protection in December 2004.

It covers policies that may have been issued by General Insurance between 1958 and 1972.

Attorney Shaun Cross, who is representing the diocese, said this week he expected insurance settlements to add significant dollars to fund the diocese’s $45.7 million offer to 75 people who were sexually abused by Eastern Washington priests.

That offer worries the 82 parishes of the diocese, which will ultimately be responsible for paying whatever amount insurance carriers and proceeds from the sale of diocese property don’t cover.

According to Cross, General Insurance will deposit $5.25 million into an interest-bearing account for the benefit of the diocese; the funds will be released in October 2007. That’s the same month the diocese owes a balloon payment of $27 million to victims under the terms of the offer.

Safeco spokesman Paul Hollie said the settlement releases the insurer from all obligations to the Spokane Diocese with one notable exception: The Morning Star Boys’ Ranch.

“The diocese is going to work with appropriate courts on Morning Star to determine (Safeco’s) obligations in that matter,” Hollie said.

The announcement comes 10 days after insurers lost an important court motion alleging that the diocese acted outside the bounds of its liability policies when it kept known pedophile priests – including Patrick O’Donnell – employed, and in fact appointed them to positions where they continued to have access to children.

Insurers had argued that these actions were not “accidents” as defined in policies.

Senior U.S. District Judge Justin L. Quackenbush sided with the diocese and denied the insurers’ motion for summary judgment.

“The negligence of the diocese falls within the definition of an accident and an occurrence,” Quackenbush said, according to transcripts of the court hearing.

The legal actions involving 11 insurers were filed in 2004 and are set for an October trial.

Estimates of insurer liability have reached more than $25 million.

The insurance carriers in the lawsuit include Pacific Insurance Co., Continental Casualty Co., American Casualty Co. of Reading Pennsylvania, Continental Insurance Co., Glens Falls Insurance Co., One Beacon Insurance Co., Indiana Insurance Co., Aetna Insurance Co., ACE Property & Casualty Insurance Co., the Washington State Guaranty Association, and Safeco.

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