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Boy Scouts of America Reaches $850M Agreement with Victims

'The debtors have reached resolution with every single official and major creditor constituency...'

(Associated Press) The Boy Scouts of America have reached an $850 million agreement with attorneys representing some 60,000 victims of child sex abuse in what could prove to be a pivotal moment in the organization’s bankruptcy case.

The agreement filed in court by BSA attorneys late Thursday would mark one of the largest sums in U.S. history involving cases of sexual abuse. The filing, known as a restructuring support agreement, includes the BSA, abuse victims, local Boy Scouts councils and lawyers appointed to represent victims who might file future claims.

“After months of intensive negotiations, the debtors have reached resolution with every single official and major creditor constituency,” BSA attorneys wrote.

The Boy Scouts of America sought bankruptcy protection in February 2020, moving to halt hundreds of lawsuits by men who were molested as youngsters decades ago by scoutmasters or other leaders. The filing was intended to try to reach a global resolution of abuse claims and create a compensation fund for victims.

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But attorneys for the Irving, Texas-based BSA have been unable to reach agreement with victims, local Boy Scout councils and insurers on how to compensate victims while allowing the 111-year-old organization to continue operating.

Thursday’s agreement signals the BSA’s acknowledgment that disagreements remain between attorneys representing abuse victims and those representing the BSA’s insurers.

In an earlier court filing Thursday, attorneys for certain insurance companies accused the BSA of allowing attorneys for abuse victims to rewrite the BSA’s restructuring plan to favor their clients.

“With only the fox guarding the henhouse, the outcome is utterly at odds with what BSA itself asserted was necessary for a confirmable plan and is permissible under the bankruptcy code,” the insurers wrote.

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Attorneys for insurers appear to be concerned, among other things, that decisions regarding insurance coverage issues would be made without their input.

Meanwhile, attorneys for the Boy Scouts are also asking for U.S. Bankruptcy Judge Laurie Selber Silverstein to declare that they have no obligation to seek court approval of a previously announced settlement with The Hartford, one of the BSA’s insurers.

The Hartford agreed to pay $650 million into the victims’ trust in exchange for being released from any further obligations under policies dating to 1971.

The Hartford settlement was roundly criticized by attorneys for abuse victims, who estimate the insurer’s liability exposure at several billion dollars. They made it clear that victims would not support any plan that includes the Hartford settlement.

The Boy Scouts have said that between $2.4 billion and $7.1 billion, including insurance rights, might be available for abuse victims. Attorneys for a committee that acts as a fiduciary representative of all victims in the bankruptcy case have estimated the value of some 82,500 sexual abuse claims at about $103 billion.

Matthew Sturdevant, a spokesperson for The Hartford, said the company’s agreement with the Boy Scouts “is a crucial building block to move this bankruptcy case toward a conclusion.”

“We are disappointed that the Boy Scouts of America have chosen to flout the organization’s tenet of keeping promises by seeking to discard a thoughtfully negotiated and mutually agreed upon deal that appropriately values The Hartford’s obligations,” Sturdevant said in an email.

In a joint statement, representatives for the victims as well as future claimants representative said the restructuring support agreement will allow the Boy Scouts to emerge from bankruptcy “while providing meaningful compensation to the victims, and holding the Boy Scouts’ insurers to the terms of the insurance policies purchased by the Boy Scouts and their affiliates over many decades.”

In a revised plan submitted barely two weeks ago, the BSA offered to issue an $80 million promissory note to a trust fund for abuse victims. It also proposed maneuvers to make up to $50 million in additional cash available for abuse survivors. The proposed changes would increase the BSA’s proposed contribution to as much as roughly $250 million, more than doubling a prior plan.

Under a new plan expected to be filed Friday, the BSA’s 250-odd local councils would contribute $600 million into the fund for abuse victims, doubling an offer from earlier this year. Under the plan, the BSA and local councils would be released from liability in return for their contributions to the victims fund.

A hearing in the case is schedule for July 20.

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