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Second Diocese of Duluth insurer settles

DULUTH, Minn. — A second insurer has agreed to settle its part in a lawsuit brought by the Diocese of Duluth in its ongoing bankruptcy.

Fireman's Fund Insurance Co. would pay the diocese $975,000 to resolve claims filed in federal court in June 2016. It is the second of five insurers named in the lawsuit to reach an agreement.

The proposed settlement, which must still be approved by a judge, would be used to continue litigation against the remaining insurers with the goal of obtaining monetary damages for victims of child sexual abuse, according to court documents.

While the agreement inches the diocese closer to resolving its already 2-year-old bankruptcy case, officials have stressed that much work remains to be done.

"This tentative settlement is another step toward the two goals that remain our priority here: providing compensation to victims in the most just way possible and emerging from bankruptcy as soon as we can," said Deacon Kyle Eller, a diocese spokesman.

The diocese filed for bankruptcy in December 2015 in the wake of a $4.9 million verdict in the first case to go to trial under the Minnesota Child Victims Act. It sued the five insurers six months later, seeking to force coverage of 125 abuse claims received in the bankruptcy case.

Last month, Catholic Mutual Relief Society of America became the first to settle after prolonged litigation and mediation, agreeing to contribute $8.95 million to victims. That settlement is contingent upon a final reorganization plan that would resolve all claims and allow the diocese to emerge from bankruptcy protection.

The Fireman's Fund settlement differs in that the funds would not be directed toward victim compensation. Rather, the diocese seeks to use the payment immediately for court-approved administrative and legal expenses involved in ongoing litigation against Liberty Mutual, Church Mutual and Continental insurance companies.

In a motion seeking approval of the agreement, diocese attorneys Ford Elsaesser and Phillip Kunkel noted that the insurers are the primary source of potential compensation for victims. A committee representing the 125 claimants has also signed on to the proposed settlement.

"The settlement payment to be made by Fireman's Fund will assist the diocese in prosecuting the coverage litigation and thus monetizing that valuable asset, for the benefit of (victims)," the attorneys wrote.

The claims date as far back as the 1940s, providing difficulties for attorneys attempting to sort through historical policies and determine each insurer's obligations. The diocese attested that it maintained Fireman's Fund coverage between 1958 and 1964, though the actual policies have never been located and the insurer has denied that they ever existed.

Fireman's Fund no longer exists as an insurance company, having its commercial policies integrated under the umbrella of Germany-based parent company Allianz in 2015.

U.S. Bankruptcy Judge Robert Kressel will hold a hearing Jan. 4 to consider both the Catholic Mutual and Fireman's Fund settlements. It is expected that the agreements would be approved, barring any unexpected objections.