The Battle over Boy Scouts’ Bankruptcy Plan Escalates: Insurers Accuse the Organization of Acting in Bad Faith

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(USA Herald) – In a recent Chapter 11 appeal, insurers are alleging that the Boy Scouts of America’s bankruptcy plan was not proposed in good faith. Attorneys representing the insurers argue that the plan impermissibly changes their rights under the policies that were issued to the organization for the purpose of covering sexual abuse liability. The appeal was heard in Wilmington, Delaware and Theodore J. Boutrous Jr., the insurer’s attorney from Gibson Dunn & Crutcher LLP, stated that the bankruptcy judge committed a legal error when confirming the $2.5 billion settlement and Chapter 11 plan.

According to Boutrous, the judge did not examine the overall circumstances surrounding the drafting and proposing of the plan to pay sexual abuse claimants. This includes the “explosion of claims” that the Boy Scouts faced after the bankruptcy case was initiated in February 2020. The number of abuse claims skyrocketed to 82,000 by the time the bar date arrived, and Boutrous pointed to testimony from the debtor’s own experts that concluded that a significant portion of the claims wouldn’t withstand scrutiny. The attorney also stated that the Boy Scouts did not take any measures to weed out potentially invalid claims, instead using the large number of abuse claims to apply pressure to the nonsettling insurers to change their stance and agree to the settlement fund.