Insurance, abstention, church sex abuse cases

INSURANCE: Abstention from coverage declaratory request in deference to state court church sex abuse proceedings… request to add claim arising from discovery of 1994 settlement agreement similarly denied… Lovell.

Travelers (Travelers Casualty, USF&G, St. Paul Fire) seeks a declaration that it is not obligated to defend or indemnify the Roman Catholic Bishop of Helena in pending state litigation and that any coverage that might have existed was forfeited by lack of timely notice. The Bishop urges the Court to abstain because an earlier-filed state court action raises similar or identical issues. There are 3 underlying state cases related to this declaratory action. Whalen v. Diocese of Helena is brought by 235 plaintiffs against the Bishop for injuries alleged from the 30s through the 70s. Doe v. Diocese of Helena and Ursuline Sisters is brought by 89 plaintiffs. Most significant because it is a seemingly parallel state action filed before this one is Whalen v. Catholic Mutual Relief Society (Whalen II), in which the plaintiffs claim they are 3rd-party beneficiaries of the Bishop’s policies and have vested rights in benefits. They have requested the State Court to determine the scope & extent of coverage under all policies issued by the Diocese’s insurers.

Accepting jurisdiction would result in unnecessary determination of state law issues and duplication of judicial effort contrary to comity and federalism. The coverage issues present state law questions. Some of the claims may eventually require determinations of novel state law questions. Travelers asserts non-declaratory judgment claims for reformation of contract and breach of contract. The reformation claim is dependent on its claim that the policy was never issued, and the breach of contract claim would be moot should the Court find that the policy was never issued. Thus these claims are closely related to and dependent on the declaratory claims. They are also declaratory in nature themselves. For instance, a declaration is sought that the 1971-73 USF&G policy affords no liability coverage and a declaration that the Bishop failed to provide timely notice. Travelers disagrees with the Court’s determination that the state action is a parallel proceeding. A parallel proceeding does not require precisely the same issues and parties; it is sufficient if they depend on the same factual circumstances. This definition in state and federal declaratory actions, in the context of multiple carriers and claimants, carries with it the benefit of avoiding inconsistent treatment of claims by similarly situated plaintiffs. Further, the Bishop asserts that it will cross-claim against its insurers in the state coverage action to resolve all coverage issues arising in Whalen and Doe. Moreover, Montana law issues will necessarily be addressed by the state coverage action. As the Bishop points out, such issues may include whether an insurer may deny coverage for sex abuse injuries committed by employees under the guise of whether the supervising church “expected or intended” the injuries, which policies are triggered by the claims of abuse, and how many times each policy must respond to each claim of abuse. It is clear that there will be significant overlap in the coverage issues affecting the insurers and the Whalen and Doe plaintiffs.

Travelers seeks to add a claim arising from its recent discovery of a 1994 settlement agreement that allegedly released St. Paul from any obligation to indemnify the Diocese for future sex abuse claims and allegedly promised that the Diocese would pay the costs of any future claims. Although framed as a non-declaratory claim (for breach of contract), this is another dependent claim that would first require determination of state law which can be raised in the state proceeding. The Court remains convinced that abstention is appropriate. Dismissed without prejudice.

Travelers Casualty & Surety, USF&G, and St. Paul Fire & Marine Ins. v. Roman Catholic Bishop of Helena, 40 MFR 232, 3/22/13.

Patrick Sullivan (Poore, Roth & Robinson), Butte, Frederick Marczyk, Philadelphia, and Robert Vinci, Florham Park, NY (Drinker Biddle & Reath), for Travelers; William Driscoll (Franz & Driscoll), Helena, and James Murray (Dickstein Shapiro), DC, for the Bishop.