Junho 13 2002, category: Misc, by: Yaelle

The New York Times
June 13, 2002

Roman Catholic Church Faces Questions About Finances

Of the church's assets, one of the most visible is real estate — churches, rectories, offices and land donated by parishioners. Some dioceses have begun to move their properties into separate corporations, putting them legally beyond the reach of plaintiffs.

A few have sold or mortgaged property. Last month, Cardinal Francis E. George of the Chicago Archdiocese said he might sell his $15 million mansion, adding that the money could be used to pay abuse settlements.

In 1997, the Diocese of Dallas mortaged several vacant lots, its chancery and a building that once housed an elementary school to raise part of a $30 million sexual abuse settlement. The alternative was bankruptcy. "That was potentially catastrophic," Bronson Havard, a Dallas church official, recalled.

In 1995, the Archdiocese of Santa Fe sold a retreat run by Dominican sisters and other New Mexico properties to pay what its insurance did not cover of abuse settlements estimated at more than $30 million.

For years, churches have relied on insurance to bail them out. But churches can no longer assume their liabilities will be covered. Last month, the Boston Archdiocese found that its policy would cover a third - or less - of the claims to 86 victims.
The Resistance of Insurers

Insurers are responding to the crisis largely by raising premiums and excluding coverage of sexual abuse by priests.

"If you say the word Catholic church to an insurance company, it's a pretty big buzzword," said Mr. Korotky of the bishops' conference. "The real challenge going forward will be insurance premiums and the skyrocketing cost of them."

In addition, Mr. Korotky said, "We are seeing a lot of insurance underwriters excluding sex abuse and molestation."

Insurers can, and have, refused to pay churches in sexual misconduct cases they find are "intentional acts" - behavior considered criminal in intent - that is continual and that church officials hid.

"There is no coverage for pedophilia," said Michael Sean Quinn, a lawyer in Austin, Tex., who has defended churches and who teaches insurance law at the University of Texas.

That proved to be true in a 1998 case in Stockton, Calif., where a priest was accused of molesting two brothers. At least six insurers refused to pay claims under the "intentional acts" exclusion because they said church leaders ignored documentation that the priest was a possible threat. As a result, the diocese was forced to pay the $7.65 million settlement.

Since then, the diocese, the plaintiffs' lawyers and the insurers have continued to battle in court over further payments.

Insurers of the nation's Catholic dioceses include big carriers like Kemper and Travelers, as well as small companies that specialize in church policies.

One is Catholic Mutual Group, based in Omaha. As the clergy scandals grew this year, Timothy Wagner, the Nebraska insurance commissioner, asked his staff to review the company's finances. "Catholic Mutual is pretty unique in that it writes policies only for Catholic churches," Mr. Wagner said. "That got us to thinking."

His examiners gave the company a clean bill of health, but they found that its liability payments rose from $1.8 million in 1998 to $6.4 million in 2001. This represents all liability claims on its church policies, including for sexual abuse.

Another insurer, National Catholic Risk Retention Group in Lisle, Ill., has also seen a rise in liability claims. Its financial statements show that losses in 2001 rose by $2.2 million, largely because of higher payouts and the need to increase reserves.

At the same time, the company doubled its financing, to $1.1 million, of a program to counter sexual misconduct. On its Web site, National Catholic said the program was intended to give priests "a clear understanding of what constitutes an appropriate supervisory relationship" with children and young adults.

Neither National Catholic nor Catholic Mutual would comment on their business. A spokesman for a third large carrier of church insurance, Arthur J. Gallagher & Company, would say only, "It's too volatile a situation now - we're too close to the flame."

John Andre, a spokesman for A. M. Best, the insurance ratings agency, said, "With most insurance, you can approximate what are future losses."

"But with this, there is a perceived lack of control by the church," he said. "It's hard for insurance companies to get their hands around their potential exposure, except to know it could be considerable."

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Religious Abuse?

Too Little! Too late!

Recently, you have seen the Catholic Church react to the numerous scandals it has caused. Whether they are accusations of pedophilia, rapes of nuns, abortions of nuns or financial scandals, there seems to be no end, and this is only the tip of the iceberg. Well, those American Cardinals were quite a sight as they paraded in front of their pope!