Insurers question claims process in Boy Scouts bankruptcy

DOVER, Del. — The judge presiding over the Boys Scout of America bankruptcy is weighing a request by insurance companies for permission to serve document requests on 1,400 people who have filed sexual abuse claims and to question scores of them under oath in an effort to determine whether there is widespread fraud in the claims process.

The insurance companies maintain that tens of thousands of sexual abuse claims that have been filed in the case appear to be barred by the passage of time based on statutes of limitation in many states. Thousands more lack essential information needed to determine their validity, such as identifying a connection with the Boy Scouts or the name of a perpetrator, according to the insurers.

In addition to wanting to question alleged abuse survivors, the insurance companies on Wednesday requested permission to question and collect documents from 15 plaintiffs’ attorneys who personally signed hundreds of claims. Claim forms typically must be signed by the claimants themselves, but in the days leading up to the deadline last November, some attorneys signed several hundred claim forms a day.

The insurers contend that a large percentage of attorney-signed claims are missing critical information, and that many appear to be submitted “machine-gun style,” with photocopied attorney signatures and signature pages generated before the proofs of claim were even created. Bankruptcy rules state that by signing a document submitted to the court, an attorney certifies that he or she has reviewed the contents to ensure it has evidentiary support.

The requests for discovery have been met with strenuous objections from many plaintiffs attorneys, but the Boy Scouts and the official committee representing sexual abuse survivors did not file any papers in response.

“The legitimate claimants should welcome this discovery,” said James Ruggeri, an attorney for the insurers. “We want to make sure dollars are paid to those who deserve it.”

The insurance companies argue that the sheer number of claims that have been filed should raise doubts about the process.

“We have a problem in this case,” Ruggeri told Judge Laurie Selber Silverstein. “And I think the problem starts with the numbers.”

Ruggeri, a veteran of mass tort bankruptcies, noted that the Boy Scouts of America, before seeking bankruptcy protection, had been named in 275 lawsuits and told insurers it was aware of another 1,400 claims.

“Now we have more than 95,000 claims that have been filed,” he said, describing the 55-fold explosion in claims as unprecedented.

Insurers attribute the explosion in claims to aggressive advertising by plaintiffs’ attorneys working with for-profit claims aggregators.

Eric Goodman, an attorney representing a group calling itself the Coalition of Abused Scouts for Justice, argued that the insurers have much of the information they claim to lack. He also said the request for more information from hundreds of claimants is premature, given that BSA has yet to file a reorganization plan and the insurers have not acknowledged they have coverage obligations.

“We don’t know if the debtors are willing to propose a plan that that will impact the insurers’ rights in any way,” Goodman said. “We don’t know if the insurers will fund anything.”

An attorney for the Boy Scouts told Silverstein that the Irving, Texas-based organization needs to exit bankruptcy by late summer and hopes to file a plan within the next few weeks, with a hearing in April seeking court approval of the proposal.

Meanwhile, plaintiffs attorneys say it’s not surprising that many claims were submitted by attorneys shortly before the deadline on behalf of their clients. They contend that attorneys for the insurance companies are basing their arguments on questionable statistics involving claims that have been submitted, and that they should not be allowed to rummage through the files of plaintiffs’ attorneys based on speculation that some lawyers are abusing the claims process.

But Tancred Schiavoni, an attorney for the insurers, noted that while Silverstein authorized plaintiffs attorneys last year to sign claim forms on behalf of their clients, she also cautioned that doing so was “ill advised,” and could result in attorneys becoming fact witnesses who could be subject to deposition.

“They were warned, but they went ahead and did it anyway,” Schiavoni said.

The judge gave no indication on when she would rule.

Randall Chase, The Associated Press