Boy Scouts of America’s insurers have challenged the validity of sexual abuse claims brought after a legal advertising campaign saw claims grow from 1,700 to over 95,000, asking a Delaware bankruptcy judge to allow discovery on individuals and attorneys who filed claims in the organization’s Chapter 11 case.
Hartford Accident and Indemnity Co. and Century Indemnity Co. last month urged U.S. Bankruptcy Judge Laurie Selber Silverstein to allow discovery into the “staggering explosion” of sex abuse claims over the last year, telling the court that the 55-fold increase in claims should not be taken at face value, must be carefully investigated and that any invalid claims must be disallowed.
From its inception, the BSA bankruptcy storyline was that it needed to handle all of its sexual abuse claims in one forum. Now that it has what it wanted, BSA, perhaps for the first time, sees the full world of sexual abuse claims, and it is not happy. BSA is blaming plaintiff attorneys for aggressively seeking out potential claimants with advertising, creating a claim body that is 55 times larger than expected. While some of these claims may be fraudulent or opportunistic, it seems more likely that BSA was either willfully blind to the size of the sex abuse problems in its organization or knew about it and hoped the potential claimants would choose not to come forward, be put off by the bankruptcy process, or for the claims deadline to pass too quickly for many victims to file their claims.
While claimants did come forward, BSA and its insureds are gearing up to knock out whole swaths of claims quickly with omnibus objections. These objections are intended to attack the claim on a facial basis – e.g., it lacks documentation, the debtor’s books and records do not support it, it’s the wrong debtor, etc. But in large cases, they are often accompanied by massive tables of claims covering hundreds of pages that are being objected to. These tables or schedules can be extremely difficult to read, even when one knows what to look for. Additionally, claim objections carry a very short and unforgiving deadline of 30 days. If the claimant fails to respond in that time, the claim is wiped out entirely.
Nor is a facial objection the only objection sexual abuse victims are likely to face. Once claims meet sufficient technical requirements, they are then subject to objections based on the validity and amount. And again, claimants will need to respond in a very short time to maintain their claim. Moreover, as the BSA indicates in its pleadings, it intends to conduct discovery on these claims, meaning they may seek additional documents, explanations, or even depositions of the sexual abuse victims. Following which, evidentiary hearings may be required to determine the validity and amount of claims. The bottom line is claimants should be sure to remain vigilant to determine if their claim is the subject of objection and respond timely. Unfortunately, it may be subject to invasive and uncomfortable discovery as the BSA has demonstrated it will continue to put the burden of its reorganization on its victims.
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