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USA Herald – This is the case of National Union Fire Insurance Co. of Pittsburgh et al., v. Boy Scouts of America and Delaware BSA LLC, et al., in the U.S. District Court for the District of Delaware; The bankruptcy case is In re: Boy Scouts of America and Delaware BSA LLC, in the U.S. Bankruptcy Court for the District of Delaware.

In February 2020, the national organization of the Boy Scouts of America (BSA), Boy Scouts, filed for Chapter 11 protection to deal with hundreds of sex abuse claims.

By the time a claims bar date arrived in the proceedings, more than 80,000 abuse claims had been filed in the bankruptcy. The bankruptcy court recently confirm the Scout’s Chapter 11 plan, which would include two key objectives: equitably compensate for the victims who were harmed; a restructuring of the Scout’s organization that would allow it to continue to operate.

U.S. Bankruptcy Judge Laurie Selber Silverstein approved the plan on Sept. 8 after a 22-day confirmation hearing.

However, The Scout’s insurers, National Union Fire Insurance Co. of Pittsburgh et al., are not so happy with the plan. They say the plan "was the result of an egregiously flawed process."

The insurers argued in a federal court last week, that the court should overturn the bankruptcy court's confirmation of the plan.

The insurers, who include Lexington Insurance Co., Travelers Casualty and Surety Co. Inc., Liberty Mutual Insurance Co., and Allianz Global Risks US Insurance Co., argued that the plan was a tactic used by plan supports, to put pressure on the insurance units that have resisted settlement in order to force them to make inflated payments.

According to the record, there were more than a dozen Boy Scouts' insurers that refused to sign off on a $2.5 billion settlement that would have provided monetary compensation directly to the victims.

Records show that the insurers profusely objected throughout the confirmation process, arguing mainly that the plan would strip them of contractual rights to defend themselves against abuse claims.

The insurers argue that the plan was not made in good faith and "abrogates core contractual rights and obligations in BSA's insurance policies," according to the brief on file.

The insurer’s brief also argues that the bankruptcy court made a crucial legal error when it found that the Boy Scouts plan "does not impermissibly abrogate the insurers' contracts."

According to the insurers, the insurance contracts they have with the Scouts contain certain rights and obligations, including the rights of the insurer to defend the insured, investigate legal liability and claims, as well as the insured’s obligation to cooperate in its defense.

The insurers said, "These and other protections are paramount for insurers because they guard against exactly the sort of misalignment between claimants and the insured that gave rise to this plan."

This matter is currently under submission.