Dozens of insurance companies that are opposing the Boy Scouts of America’s $2.4 billion bankruptcy settlement meant to bring an end to the sexual abuse claims of thousands of former scouts are being accused of acting in bad faith in a new lawsuit.
The trustee of the settlement trust, Barbara Houser, who is the retired former chief bankruptcy judge for the Northern District of Texas, filed the lawsuit in federal court in Dallas Tuesday, asking the court for a declaration that by standing in opposition to the plan, the insurers have breached their contracts.
“The defendants have disputed and/or will dispute their obligations to the trustee under the insurance policies to cover claims for personal injuries arising from sexual or other abuse in BSA’s Scouting programs,” Houser told the court in the 31-page complaint. “Accordingly, in order to effectuate the trust’s purposes, fulfill the trust’s obligations under the plan, and obtain clarity and finality regarding the defendants’ coverage obligations, the trustee seeks a declaration that defendants have breached or will breach the insurance policies by refusing to provide coverage under the insurance policies for the abuse claims.”
The trustee is also seeking compensatory damages to include attorney fees.
The case has been assigned to U.S. District Judge Karen Gren Scholer.
BSA filed for chapter 11 bankruptcy in February 2020, when the organization was facing about 275 sexual abuse lawsuits nationwide, according to the complaint. Negotiations between BSA, creditors and insurers ensued and the plan was approved in September 2022 and affirmed in March 2023.
The plan is structured to resolve 82,209 sex abuse claims, and some of the BSA insurers have already paid a combined $1.6 billion to resolve liabilities, the complaint notes.
“The trustee now seeks to resolve the remainder of BSA’s and Local Councils’ insurance coverage,” Houser wrote.
The trustee is represented by Jeff Tillotson of Tillotson Johnson & Patton and Kami E. Quinn, W. Hunter Winstead, Emily P. Grim, Sarah A. Sraders and Rachel H. Jennings of Gilbert LLP.
Counsel information for the insurers wasn’t immediately available Wednesday.
The case number is 3:23-cv-01592.