Vermont Diocese Files for Bankruptcy With No Insurance Left for Past Abuse Claims

The Roman Catholic Diocese of Burlington, Vermont has filed for Chapter 11 bankruptcy protection as it continues to face lawsuits over sexual abuse by its former clergy members in a state with no statute of limitations on such claims.

Bishop John McDermott reported the bankruptcy move to his congregation yesterday in a statement in which he said bankruptcy is the “only way to fairly and equitably fulfill the diocese’s obligations to all survivors of sexual abuse.”

Bishop McDermott apologized for the “immeasurable harm” caused by the “crimes of the clergy” and noted that the cost of such civil suits will likely only increase since the state in 2019 eliminated the statute of limitations for sexual abuse claims.

Since 2016, the church has used its own funds, sold properties, and exhausted its insurance coverage to fund settlements of close to 70 lawsuits brought by victims.

The ending of the statute of limitations on sex abuse claims has opened the door to many additional lawsuits. Currently the diocese faces 31 lawsuits, most alleging abuse 40 to 60 years ago, and the church expects there will be more in the future given there is no longer a statute of limitations.

The bankruptcy filing states that the diocese is “not attempting to avoid any responsibility” regarding sexual misconduct by clergy or any mistakes made by the diocese’s administration. “Rather, the diocese has been, and continues to be, committed to addressing the wrongs perpetrated and fairly compensating survivors,” the filing adds.

The church hopes the filing will help compensate remaining and future survivors “as equitably as possible” as well as allow the diocese to continue its “essential ministries and functions” in the community and provide the worship, outreach education, service, and charity that it currently provides.

Due to the lack of insurance coverage and the diocese’s depleted assets, the bishop said the diocese is “concerned that too large of a settlement with a select group of pending cases or a judgment in favor of a single plaintiff could leave the diocese with insufficient assets to fairly compensate other survivors and creditors, resulting in a disproportionate allocation of the limited funds available to the diocese.”

History of Settlements

From 2006 until early 2010, the diocese settled seven lawsuits for $2,680,000. In May of 2010, the diocese settled 29 lawsuits for $20,625,000. In order to meet these settlement obligations, the diocese sold several diocesan properties, including the former chancery office property in Burlington and Camp Holy Cross in Colchester. The diocese received some insurance funds to assist with these settlement payments.

In 2013, the diocese settled 11 cases for $6,750,000. To fund this settlement, the diocese said it was forced to forfeit any claim for insurance coverage for allegations of sexual abuse by clergy that occurred in the 1970s through an insurance buyback with its insurers.

Since the removal of the statute of limitations in 2019, the diocese has settled 20 cases at a cost of $4,502,500. These were funded by using its unrestricted investments and regular operating funds.

Diocese Disclosures

To date, the diocese has publicly disclosed 40 priests with credible claims of sexual abuse of a minor. According to the church, most of these incidents occurred between 1950 and 1980 and all of the accused individuals have been permanently removed from ministry and 30 are deceased.

According to the diocese, since 2002 there has only been one “credible and substantiated” claim of abuse and there are no priests within the diocese who have had a credible and substantiated allegation made against them.

As part of its bankruptcy petition, the diocese asked the court to permit it to keep paying its 54 employees and to maintain the employee benefits program. It also asked to keep its self-insurance program administered by Arthur J. Gallagher Risk Management Services. This program provides property, liability, crime, cyber, equipment breakdown, sexual misconduct, and workers’ compensation insurance.

The diocese includes 63 parishes and 12 Catholic schools that are separately incorporated and not part of the bankruptcy petition.