When Penn State law professor Marie Reilly came across a chart in the Boy Scouts of America bankruptcy filings that showed the organization's number of claims related to child sexual abuse since the 1940s, she knew she had seen something similar before.
"They look just like the time curve that you'd see for Catholic abuse," Reilly said.
The Boy Scouts of America declared bankruptcy Feb. 18, the latest in a string of Chapter 11 filings spurred by an influx of lawsuits over alleged child sexual abuse, many of which took place decades ago. And as with similar cases involving the Catholic Church, the bankruptcy of one of the largest youth organizations in America may put significant pressure on insurers as they deal with an intensifying litigation trend.
Decades-old policies potentially in play
The claims currently being filed are likely to trigger the insurance policies that were in place at the time of abuse. Insurers did not start writing strict exclusions for child sexual abuse into their policies until around the early
The BSA's bankruptcy documents describe commercial general liability policies dating back to 1962, some of which included both primary and excess coverage that offers "substantial limits of liability in many ways." The organization's policies have varied over the years from traditional insurance to fronting policies.
"While the amount of coverage remains substantial in many years, the insolvency of certain insurers and the resolution of sexual abuse and other claims have either eroded, eliminated or exhausted the liability limits for certain policies," the document reads, noting that some of the insurance policies are contingent on pending litigation between the BSA and the companies.
For example, the BSA in 2018 filed a lawsuit alleging that it obtained various primary and excess liability policies from Hartford Accident and Indemnity Co. and First State Insurance Co., which are currently units of Hartford Financial Services Group Inc. The BSA said in the complaint, which sought the recovery of at least $13.5 million in damages, that the policies did not contain aggregate limits of liability.
In a prior suit against an American International Group Inc. unit, the BSA alleged that it maintained primary coverage through The Hartford with per-occurrence limits of $500,000 from 1975 through 1977.
The BSA also states in its bankruptcy filing that for most, if not all, policy years, "some level" of coverage is available under the commercial general liability policies, which would cover sexual abuse and misconduct.
Assigning guilt
As far as the amount of the overall settlement the national organization might pay out, Jason Amala, a partner with Seattle-based law firm PCVA, said he would be "very surprised" if it is not more than $1 billion, especially since the BSA is reporting assets greater than that amount.
However, this may not be the only source of potential settlement funds, Amala said. That is because the Boy Scouts' unique structure means that typical suits against the organization also name a local council and the sponsoring organization, such as the Mormon Church.
"We think the local councils likely have assets that are worth two to three times" the national organization's total, Amala said, noting that most of the property the BSA holds is in the name of the local councils. The lawyer expects almost every local council to file for bankruptcy in California, New York and New Jersey, three of the states he identified as implementing substantial so-called window legislation in 2019.
The term refers to legislation such as the New York Child Victims Act, which extended the statute of limitations for child sexual abuse claims. It also opened a one-year window, beginning in August 2019, in which victims of such abuse could pursue civil action regardless of when the incidents took place. Industry experts have said the enormity of claims stemming from the New York law alone will likely force insurers to tap into reinsurance.
A total of 22 other states, plus the District of Columbia, also implemented new laws in 2019, according to Child USA, an anti-abuse think tank. Of those 23 laws, nine were revival laws, which, like New York's, allow for civil claims related to child sexual abuse that were previously barred from court by expired statutes of limitations. Thus far in 2020, 28 states have put forward statute of limitations reform bills, with 14 of those classified as revival laws.
"This litigation phenomenon has not peaked yet," Lytton said. "In fact, it looks like in some ways, it may continue to grow."
Insurers' 'big pocket'
Amala, who has been trying sexual abuse cases against churches and the Boy Scouts for about 20 years, said his firm is representing more than 300 people who say they were abused through the Boy Scouts and had about 80 cases that were in suit at state court when the organization filed for bankruptcy. The average age of his clients is 57.
"It's very rare that we don't find evidence that there had been complaints, or there had been red flags about a Scout leader who abused our clients," Amala said.
When the BSA filed for bankruptcy, an automatic stay was issued for all cases against the national organization, but this still leaves any case filed against the local councils unhindered. An affidavit within the BSA filings requests, however, that the judge extend the automatic stay to the local councils, using the reasoning that both the national organization and the local councils have been insured by a common set of policies.
But Reilly said she thought it was the insurance policies, not the local councils, where the "big pocket is." Her research into the Catholic Church claims found that insurers ended up paying out for substantial portions of the settlements that Catholic dioceses had reached in the past over similar child sexual abuse litigation.
"I think you're going to see a big fight by the insurance companies trying to at least gain some leverage from negotiations about how much they have to contribute," Amala said.
AIG, Chubb and The Hartford did not respond to requests for comment.