Diocese of Rockville Centre Pioneers a Global Resolution for Itself, Its 136 Parishes, and its Settling Insurers Post-Purdue
In order to resolve hundreds of Child Victims Act lawsuits alleging sexual abuse, the Diocese of Rockville Centre commenced chapter 11 to seek protection for itself, its parishes, and schools, as well as providing equitable compensation for the hundreds of claimants, while maximizing their substantial insurance assets. In 2024, the Supreme Court decisions in Purdue and Truck materially complicated such resolutions, presenting substantial hurdles to the dual objectives of getting parishes releases and maximizing insurance assets.
The Diocese, through innovation, met both challenges: It protected itself, its parishes, schools, and ministry and delivered "total peace" to their shared insurers for a cash settlement premised upon the surrender and release of their insurance protection. The key features were: (i) relying on a "hybrid" bankruptcy process that combined a traditional chapter 11 bankruptcy for the Diocese with rapid prepackaged bankruptcies for its parishes, thereby obtaining for all the protection of a discharge in bankruptcy and comfort sufficient to surrender their insurance protection; (ii) gaining for its settling insurers the protection of a channeling injunction against all derivative claims and a mechanic for obtaining consensual releases of direct claims from all affected abuse claimants; and (iii) relying upon a thorough understanding of derivative claims to protect its schools and others.
Through the hybrid process, the Diocese alone sustained the burdens of chapter 11 bankruptcy, including negotiating with claimants and insurers and creating a joint disclosure statement and plan, which anticipated parishes commencing chapter 11 cases only if there was overwhelming support for the joint plan. Once the Diocese obtained a clear mandate favoring the joint plan, all parishes filed rapid prepackaged bankruptcies, became co-proponents of the joint plan and exited bankruptcy within 36 hours of filing their cases with the protection of a discharge in bankruptcy against all historical abuse claims, whenever asserted.
