Q: What does the Boy Scouts of America’s bankruptcy filing mean for churches who have hosted or chartered Boy Scout troops and their insurance coverage?

A: While the bankruptcy proceeding may eliminate certain protections and the ability to recover from the Boy Scouts of America for past incidents of sexual abuse or injury, it is unlikely to have any effect on a church’s own liability coverage.

The Boy Scouts of America (“BSA”) filed for Chapter 11 bankruptcy in February 2020, following a large number of individual lawsuits that were filed against the national organization on the basis of sexual abuse. For churches and other ministries that have served as charter organizations for a Boy Scout or Cub Scout troop, BSA has generally agreed in writing through a charter agreement to provide liability insurance coverage for the charter organization and to indemnify, or take financial responsibility, for claims against the charter organization by third parties. The effect of the bankruptcy will likely eliminate future claims and judgement against BSA for acts or events that took place prior to the bankruptcy. In effect, this could eliminate BSA’s obligation to indemnify a church for past incidents involving a Boy Scout troop that the church chartered or hosted.

In an attempt to preserve any protection that might be available through BSA for past incidents of abuse that have not yet come to light, some attorneys are encouraging any churches that have ever hosted or served as a charter organization for a troop to file a proof of claim with the bankruptcy court. Even if you are not aware of any issues or concerns regarding past scouting activity, these attorneys contend that filing a proof of claim with the bankruptcy court may provide some protection in the future if you later become aware of a past abuse allegation or other injury related to the Boy Scouts. Some denominational offices are also encouraging their member churches to take action prior to the November 16, 2020, claim notice deadline that has been set by the bankruptcy court.

If your ministry has ever hosted or chartered a Boy Scouts troop and is wondering if it should take any action in relation to the BSA’s bankruptcy case, you should consult with a local attorney. If your ministry is a part of a denomination, it would also be a good idea to check with your local, regional, or national headquarters for guidance. Some denominational offices have been coordinating a joint effort among their member ministries to file on behalf of ministries that either are or have in the past chartered a troop. For more information on the BSA bankruptcy proceedings and how to file a proof of claim, a BSA restructuring website has been created.  

Insurance Coverage

Although BSA has historically agreed to indemnify charter organization churches and provide liability insurance on their behalf, that obligation will not likely remain after BSA’s bankruptcy is completed. If BSA liability insurance coverage is no longer available for charter organization churches, then the churches own liability insurance would likely apply. This is especially true if the charter organization church is sued directly.

Accordingly, churches are still encouraged to ensure they have their own liability coverage for scouting activities. For churches and other ministries that have had occurrence-based liability coverage through their insurance carrier, coverage would apply to covered claims as long as the policy was in effect at the time of the incident. Other liability policies apply on a claims-made basis, meaning the claim must be submitted during the period of time that the policy is in effect. If an allegation arises after a policy expires or the policy period ends regarding past acts related to a chartered Boy Scouts troop, an occurrence-based policy would still generally provide coverage for covered claims. Brotherhood Mutual’s liability coverages are provided on an occurrence basis. If you are aware of a past or present incident that may give rise to a claim, you are encouraged to contact your insurance carrier or your agent.

Posted October 23, 2020

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The information provided is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. Accordingly, no attorney/client relationship is created through this process, and no legal advice will be provided. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.