Bankruptcy Court Approves New Jersey Diocese’s $87.5M Plan for Abuse Victims

Almost three-and-one-half years after the Catholic Diocese of Camden, New Jersey filed for bankruptcy citing financial effects from the pandemic and sexual abuse settlements, its Chapter 11 reorganization plan has been approved.

The final plan, the ninth amended proposal, establishes an $87.5 million trust to compensate about 324 survivors of sexual abuse within the diocese. The trust will be funded with $87.5 million from the diocese and related Catholic entities. Insurance policies turned over to the diocese will contribute $30 million.

U.S. Bankruptcy Judge Jerrold N. Poslusny, Jr., in Camden, approved the plan that allows the diocese to pay into the trust over five years and keep operating so it can pay creditors.

The settlement also requires the church to maintain and enhance protocols for the protection of children that were first implemented in 2002.

The plan was approved last April by all classes of creditors and 97% of survivors.

However, last year some insurers objected to loopholes that they feared might increase their liability by millions beyond their agreed $30 million, and that they said did not adequately consider legal costs. Insurers also argued that the plan was not feasible because the diocese was unable to fund its portion of the trust.

Judge Poslusny agreed with some of the insurers’ concerns. “The court cannot approve a plan which allows attorneys to file invalid and fraudulent claims without consequence,” Poslusny wrote in his opinion last September ordering another reworking of the plan.

Last week, Judge Poslusny found that the revised plan resolved the insurers’ issues. After a review of the diocese’s most recent financials, he further found that there “is reasonable probability the provisions of the plan can be performed.”

The diocese serves about 480,000 Catholics in 62 parishes across six counties. The district includes four missions, and the diocese is also affiliated with 22 elementary schools, five high schools and a pre-school daycare, in addition to various social service and charitable organizations.

Prior to filing for relief, from 1990 to 2019, the diocese reached 99 settlements with abuse survivors for $10.1 million.

In December 2019, the state enacted the New Jersey Child Victims Act, reopening the statute of limitations to previously-barred claims of child sexual abuse through November 2021.

The diocese, along with other dioceses in the state, started the Independent Victims Compensation Fund (IVCF), in June 2019, and hired Kenneth Feinberg and Camille Barros to administer and settle claims. The diocese settled 71 claims for a total of $8.1 million through the IVCF. The diocese did not seek any reimbursement from its liability insurers for any of those claims.

The diocese has maintained an insurance program with numerous insurers. The bankruptcy court assumed jurisdiction over any insurance payouts. Insurers involved include certain Lloyd’s underwriters, Century Insurance, Interstate Fire & Casualty, Granite State, Lexington, National Union Fire, National Catholic Retention Group, American International Group and Catholic Risk.

Camden Diocese Bishop Dennis Sullivan thanked Judge Poslusny for providing a “fair venue for this case and for ensuring the interests of the survivors and the Diocese of Camden were considered justly.”

Sullivan expressed his “sincere apology to all those who have been affected by sexual and pledged his “continuing commitment to ensure that this terrible chapter” in the history of the diocese “never happens again.”

Counsel for the survivors’ committee. Jeffrey D. Prol, partner at Lowenstein Sandler law firm, said the committee is pleased that the court confirmed the plan of reorganization it negotiated with the diocese. “We look forward to facilitating an expeditious distribution to survivors of sexual abuse, who have been, and remain, the real heroes in our battle to bring some semblance of justice for them,” Prol said in a statement.