The Church Of Jesus Christ and the BSA Bankruptcy Case

By Cassandra Hedelius

Crossposted from Public Square Magazine

A few days ago, many saw the arresting headlines that The Church of Jesus Christ of Latter-day Saints has agreed to pay an enormous amount of money—a quarter of a billion dollars—to survivors of sexual abuse by Boy Scouts of America leaders. It’s a complicated legal situation, and an impossibly sad one, and I’ll do my best to make it clear what’s happening and why. (I’m a lawyer, but not a bankruptcy lawyer, and bankruptcy law is quite complicated, so I’m going to leave out a lot of legal nuances.)

I’m a parent of young children, and I can hardly fathom the horror I’d feel if one of them was abused. I can hardly fathom the pain, despair, and confusion abused children feel. I do know, from some personal experience with loved ones, how the effects of childhood abuse can persist all life long in depression, anxiety, difficulty forming loving relationships, problems in school and employment, and worse. At the end of the world, I expect the Lord will dispense mighty judgment against abusers and also merciful understanding to the many abusers who were themselves abused.

But until that time, we must do what we can to prevent abuse and deal with the abuse we fail to prevent. The court system is an awful, slow, painful, and imprecise method, but alas, it’s the best we can manage.

By February 2020, the Boy Scouts of America (BSA) organization was suffering financially, with no relief in sight, because it faced an avalanche of lawsuits from men who had been sexually abused by Scout leaders. So it filed for bankruptcy.

Bankruptcy doesn’t wipe out the rights of people who have been injured by the BSA to sue for compensation. In the BSA’s case, a committee for abuse survivors represented by a law firm had gathered information from almost 84,000 men who were abused and had sued BSA. Without the bankruptcy process, each of the thousands of verdicts against BSA would have been handled separately and quickly drained BSA’s funds, which might have left many survivors with nothing. But because BSA filed for bankruptcy, the court made the group of survivors a part of the case, so their claim to a share of BSA’s assets could be protected during the bankruptcy process.

What is a life ruined by childhood abuse worth? How do you measure the suffering and lifetime struggles? Supposing each of the 84,000 survivors has a valid claim, paying each survivor $10,000 would cost $840 million. And $10,000 is probably a pitiful amount compared to what many of the survivors have suffered; even $100,000 (at a total cost of $8.4 billion) would probably only be a good start for many. Lawyers speaking on behalf of a subset of 24,000 survivors claim $8 billion is necessary to compensate them. This is a situation involving immense amounts of money and probably no possibility of a truly just outcome. The actually documented abusers are unlikely to have enough money to justly compensate their victims even if they’re successfully sued, and though they bear the greatest blame, it’s apparent the BSA organization was sometimes negligent in preventing or acting to stop abuse.

The BSA isn’t the only organization financially responsible. Like most such groups, they paid for insurance coverage to protect them from liability from lawsuits. Their main insurer is The Hartford. Moreover, the BSA is structured so that individual Scout troops are usually governed by local councils, and sponsored by churches, schools, or community groups. According to one law firm representing many of the abuse survivors, approximately 2,200 of the almost 84,000 cases of abuse happened in troops sponsored by The Church of Jesus Christ of Latter-day Saints. But according to the Wall Street Journal, BSA court filings indicate “roughly 7,700 [claims] could potentially be tied” to the Church. The Church responds that according to its review, only about 4.2% of those 7,700 cases are actually likely to result in liability for the Church. This means that even though most of the 7,700 may have been abused, there wasn’t any way the Church could have known, prevented, or stopped it. One of the heartbreaking things about abuse cases is that sometimes only the abuser can be held responsible, and that leaves the survivor with little or no help.

Interestingly, at the time the Church ended its relationship with BSA in 2019, about 20% of all scouts (and 37% of all Scout troops) were sponsored by the Church, but only between 2.6% and 9.2% (depending on whose figure is correct) of the total abuse claims arise from troops sponsored by the Church. Most of the abuse would have happened long before 2019, and I don’t know how the 37% figure has varied through the years, but it’s still interesting to note. It’s fair to conclude that the incidence of abuse from Church-sponsored Scout troops is probably much less than the risk of abuse overall.

Every act of abuse is a horror with no excuse, but this proportional perspective does matter because the Church is not the only sponsoring organization being accused. According to the document compiled by lawyers for an official committee of abuse survivors, Methodist, Baptist, and Catholic churches all have more abuse claims than the LDS church, and Presbyterian and Lutheran churches have about half as many. If the Church is correct that it only bears responsibility for 324 survivors, then its offer of $250 million to compensate abuse survivors is more than $770,000 per person. If the BSA is correct that the Church is liable for 7,700 cases of abuse, that’s still more than $32,000 per person. The bankruptcy case means all settlement money will be pooled into a single fund to compensate survivors without distinguishing who besides the BSA is liable for a particular survivor’s abuse. But the Church shouldn’t be expected to pay an amount that’s out of proportion to its responsibility.

And so, because the Church could face some liability for the abuse that happened in Church-sponsored troops, and because The Hartford is obligated to protect BSA from financial liability, they are both part of the bankruptcy proceedings. They—the BSA’s national leadership, the BSA’s local councils, The Hartford and other insurers, the Church and other “Contributing Chartered Organizations,” and representatives for the survivors—have all been in mediation for months, negotiating who should pay and how much. If mediation fails to produce an agreement that satisfies everyone—and it looks as though some survivors’ representatives are unhappy with the latest offer—then the bankruptcy court will decide what to do.

Just because someone has paid for liability insurance coverage doesn’t mean the insurer is going to pay up without a fight. In this case, I suspect Hartford is claiming its responsibility is lowered by BSA’s failure to act as responsibly as it should have to prevent and deal with abuse. Insurers have no desire to be a backstop that enables monstrous crimes like child abuse, and most insurance policies are written to protect the insurer from having to pay if the insured didn’t act effectively enough to avoid wrongdoing. That’s why this isn’t an easy question of “we’re insured for $x, so that’s what we can give to survivors.” It would take a complicated court trial to determine how much The Hartford is and is not responsible for paying.

In mediation, everyone is considering various factors: what the Court is likely to order them to pay if mediation fails, how much it will cost them to pay lawyers to handle the case if mediation fails, how much every other party has the ability to pay, whether other parties are being honest about how much money they have, how much they will be found liable for or entitled to in the thousands of abuse lawsuits, etc. Abuse survivors’ representatives have accused the BSA and especially its local councils of not honestly disclosing their assets in order to prevent having to pay more to survivors. The Wall Street Journal reports that survivors’ representatives are also unhappy because the BSA told them The Hartford and another insurer would pay much more than they are now offering.

Survivors’ representatives also accused the Church of shortchanging survivors, on grounds that I think are unfair. “The only winners in this latest proposal are the Boy Scouts, their local councils, the Mormon Church, and the Hartford insurance company,” Michael Pfau, an attorney whose firm represents more than 1,000 abuse claimants in the bankruptcy, said in a prepared statement. “The Boy Scouts are offering abuse survivors a fraction of what their cases are worth and the assets available to pay them,” Pfau added. “The Mormon Church is reported to have roughly $100 billion in assets, but it is offering a paltry $250 million to compensate the thousands of abuse survivors who were abused in Mormon Boy Scout troops by Mormon Scout leaders.”

Pfau’s job is to advocate for his clients, but his argument is flawed. The Church has only been “reported to have roughly $100 billion in assets” by a hostile source with no supporting evidence, and the Church disputes the figure. More importantly, the Church was only involved in a small portion of the survivors’ cases: 9% at most and possibly much less. The BSA is likely to also be at least partly liable in those cases, as well as the actual abusers. Most of those claims probably haven’t been tried in court yet to determine the degree of fault, and the Church having the deepest pockets doesn’t make it morally or legally responsible for the entirety of what happened. Given the Church’s actual liability, $250 million may be a fair and even generous offer.

Negotiations are still ongoing, as well. We’ll likely soon see headlines about what the BSA’s other major insurer will contribute to the survivors’ fund, as well as other churches and sponsoring groups. It looks like there’s a good chance the BSA and its local councils will be pressured into contributing much more money. The current agreement total of nearly $1.9 billion will grow as mediation continues.

Even for a lawyer, it feels cold to discuss such matters in terms of proportional liability and claims that haven’t gone to trial. These survivors have suffered immeasurably and we all wish they lived in a world where someone could not only write a big enough check but wave a magic wand and fix everything. We can at least hope that because this case isn’t over, things will look much better for the survivors before long.
Someone I love dearly was horribly abused as a child, not by a Scout leader, but by his own parents. It was Scout leaders and church leaders who helped him. I don’t say this to excuse the BSA or to downplay what happened to children who were abused by Scout leaders, but merely to note that life is complicated. There is good and evil in many places, and sometimes together in the same place. I hope for justice, help, and hope for the BSA abuse survivors. I hope for other abused children to have loving church and community leaders to help them. I hope for all adults to love and look out for all children within their influence. I hope for the Savior, with healing in his wings, to right all wrongs and wipe the tears from their eyes.

Cassandra Hedelius studied Political Science in Oklahoma and Law in Colorado. She currently lives in Aurora, Colorado and cares full time for her three young children and cat.

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