Muttsy

With respect to the the TCC $103B claim value estimate, it is probably conservative but it is also academic. 

The BSA's most valuable asset is the insurance. Some councils participated in its insurance program a year or a few prior to 1984 when the national BSA insurance program became mandatory for all councils.  Some of the pre-1984 policies named the local councils, troops and camps as "additional insureds." Before the national insurance program was established LC's maintained their own separate insurance. Much less is known about those policies because the LC's have been unwilling or unable to produce them. Lost policies problems can be overcome. The problem is that it is difficult to negotiate when one doesn't know the extent of insurance coverage. 

The same is true with respect to the SO's especially the larger ones like the Catholic Dioceses, Mormon, Methodist etc. They maintained the same Commercial General Liability policies as BSA, and often with the same insurance companies. Again, the TCC has not been provided with most of these policies so the extent of coverage with respect to those entities is unknown, but it is substantial. 

I say substantial because of several critical problems for the insurers who sold these policies.

First, prior to ~1984, the underwriters of these companies did not envision a claims avalanche such as the child sexual abuse phenomenon that has taken place over the past fifteen years.

Second, They did not foresee that legislatures would pass retroactive window legislation years later that would revive "dead" claims and policies.

Third, they never understood the nature of pedophilia and child molesters nor understood that a pedophile has over a hundred victims in a lifetime of offending. They knew or should have known from their claims experience especially with the BSA that it could be a big problem. But they went ahead and collected millions of dollars in premiums from these institutions and issued the policies. 

Fourth, until the late 1980's they issued polices for bodily injury that did not have "aggregate caps." The policies had maximums of $250/500k per abuse occurrence but there was no cap on the number or amount of claims it would face per policy year. If they had five claims per policy year then their maximum exposure would be 5 x 500 = $2,500,000.

This was standard in the industry. No annual aggregate cap policies like these extend back in time to at least the 1950's. 

None of them thought these legacy policies would later emerge on their balance sheets as massive liabilities decades later.  Century and its predecessor companies like Insurance Company of America (INA), later acquired by ACE and then ACE when it merged and became Chubb understood the problem by the mid-nineties. INA and CIGNA which were responsible dumped these toxic polices in to a "run-off" company it named Century Indemnity.

It grossly underfunded Century, putting only 1.2B in to it. (A "run-off" insurance company is one that does not sell insurance. It exists to handle claims from historical legacy policies like the ones discussed above.) Century has less than $400M left of that initial capitalization, not nearly enough to cover the BSA claims alone not to mention all the other institutions that purchased policies from INA et al. 

The mystery behind the creation of Century as a "toxic waste dump" of massive liabilities that was grossly underfunded is the reason the Coalition has subpoenaed documents from Chubb regarding this transaction last week. Why Chubb? Because Chubb (f/k/a ACE Insurance) purchased Century Indemnity in 1999 for ~$3.5B. The Coalition/TCC/FCR will correctly argue that Chubb is responsible for the toxic polices in its subsidiary Century Indemnity. Chubb will fight to the death because the liabilities of Century Indemnity are Chubb's liabilities and those liabilities are, as asserted by the TCC, $103B conservatively. Chubb is welcome to fight to the death post-confirmation with the Trustee of the post-confirmation trust. The BSA will be out of bankruptcy and the fight over insurance will go on. There are insurance coverage lawyers that are superstars that the trustee will hire. 

Chubb has some serious problems here. First, It is the largest (most prestigious) publicly held property casualty insurance company in the world. It has the highest rating (A++) that A.M Best, the Moody's of the insurance industry, gives in recognition of Chubb's balance sheet, book of business and management.

A.M. Best is apparently unaware that Chubb's balance sheet does not reflect the toxic liabilities of subsidiary Century Indemnity and Century is now, essentially, insolvent because of BSA claims. 

When ACE purchased Century in 1999, the transaction had to be approved by the Pennsylvania Insurance Commissioner. The Coalition is pursuing those emails, letters, memoranda, too. The PA Insurance Commissioner undoubtedly assumes that Chubb as the parent company of Century will stand behind it and won't it go into insurance insolvency. 

And it is not just the Insurance Commissioner that cares about this. So does the stock market. So do Chubb shareholders. And most importantly, so do existing and future Chubb policy holders. 

When you look at $101B in BSA exposure and realize that Chubb's total market capitalization as of today is $75B, you see the math problem for Chubb. 

If Chubb were to allow Century to go insolvent, it would devastate Chubb's A.M. Best rating. Who would be foolish enough to buy insurance from a company that reneges on its promises to policyholders? That is why Chubb is in a tough spot and why Tanc Schiovoni, the attorney for Century behaves like such a goon in this case. His job is to throw as many obstacles in the path of the bankruptcy case as he can. He attacks the survivors as frauds and their lawyers as filing fraudulent claims. He is not acting in good faith. He is Chubb's thug. 

Finally, on a brighter note, what we don't know but which the Coalition is pursuing, is the question of how much re-insurance there is in the case. Again, neither the Hartford nor Century have cooperated in giving this information. It could be substantial. These are some big players like Lloyds of London, Berkshire Hathaway, AXA Bermuda and a host of others who issue insurance policies to insurance companies enabling them to lay off risk. 

We also don't know if there are insurance company "treaties" involved here. Without getting in to the weeds, think NATO. When one comes under severe "attack" they have agreements among themselves to help out in case one of them gets hammered. 

These are things to think about when considering the TCC/Coalition/FCR plan when, hopefully, the judge allows them to file it. 

As cryptic as the judge's comments and questions seemed, I think she will do the following (generally), because there is no alternative for her. She knows there is no support for the BSA plan A. The toggle plan means cram down and she knows she cannot cram down a plan over the objections of 95% of the victims, either politically or legally. A cram down has never been done in a sexual abuse bankruptcy and she won't do it here. 

First, Kosnoff's/Abused in Scouting's campaign to encourage its 17,000 clients to write to the court has been impactful even if the judge redacted portions of them. Only the mediation parties were allowed to see the Proof of Claim forms; the world got the opportunity to read the letters and the excruciatingly painful personal narratives. The TCC led its opening argument with the letters and what they mean. The letters were important to counter the judge's apparent debtor bias, e.g. "restoring the BSA and its mission is paramount" and "the BSA needs to put this behind them and get back to fundraising," etc. She's said nothing about whether the BSA can be made reasonably safe for children going forward. Experts have opined that the structure of scouting is inherently risky because it places scouts in vulnerable situations that no amount of scout protection training is going to change. 25% of the claims in the bankruptcy involved abuse after the BSA implemented its sexual abuse programs in the late 1980's. see ChildUSA Report on Scouts. 

The judge is going to end BSA exclusivity, probably on Monday. The plaintiffs will get their shot. Their plan will be filed within two weeks if not sooner. After it is filed, some of the councils and insurance carriers will engage in (more) realistic negotiations because she will order the BSA to turn over to the plaintiffs decades of its settlement claims files. These files will contain the evidence of claim value because they will show what the BSA and its carriers actually paid on similar claims and cases over the years. She said she would do it on a letter request meaning no motion is necessary. That was a big deal yesterday. 

Once plaintiffs have that data,  claims estimation would superfluous. She strongly hinted that claims estimation would be wasteful, expensive, unnecessary and that she didn't feel it fell within her job description. 

She implied a few other important things. The issue of insurance neutrality means the insurance companies are allowed to object to a plan and be heard at confirmation, but they don't have the power to block the plan. That apparently is the law and was the part of the discussion yesterday about the origins of insurance neutrality as an offshoot of "standing" law. 

I believe she will signal she is not going to approve the Hartford settlement. I thought the Coalition argument that the settlement sent a terrible signal to the other carriers that they were in control of the case and need not seriously negotiate. It also broke whatever good faith may have existed between the plaintiffs and the BSA and also the mediators who brokered it. Regarding the mediators I think she recognized from the various colloquies about how the mediation sessions were being run that the mediators are an impediment to progress. That's why she told the parties to start talking directly to each other. She basically fired the mediators is my take. 

The TCC/Coalition/FCR Plan will encompass settlements that are worked out in the next 60-90 days with participating LC's, SO's and insurance carriers. Those participating entities will get third party releases and will participate in the channelling injunction. Something critical from yesterday is that she was open to retaining continuing jurisdiction for some period of time post confirmation and would approve/modify the confirmation order to include those entities who settle with the post confirmation trust. For the holdouts like Century, Chubb and the other hard cases like the Mormons, they get thrown in to the post confirmation trust and they can slug it out there for the next how many years. That realization may bring some of them to the table now or not long after plan confirmation as they see the ship sailing away. They may also be incentivized to get realistic because it will get more expensive for them to hold out. As noted here, more states are passing windows. (Last week, it was Arkansas! Arkansas! ) The dominoes are falling. MI, IL, OH, FL, TX etc won't be far behind.) 

For those holdout LC's and SO's they will be facing tens of thousands of lawsuits and not only from claimants in the BSA bankruptcy. More victims will come forward and file lawsuits against those entities. It will cost them more, probably much more to settle later on assuming they don't get wiped out in their own bankruptcies. 

The judge won't do estimation.  Everything unresolved will go in to the post-confirmation trust. Whatever funds go in to the trust at confirmation effective date, the net after set-aside reserves to fund the trust and its lawyers, will be distributed to the claimants under the Distribution Trust Protocol or whatever its called. That is where claims will be vetted for fraud, lack of evidence, etc. As the trust settles out with holdout insurance carriers, LC's and SO's more funds will be available for subsequent distributions. Or those claimants can pursue their lawsuits separately. 

The toggle plan was highly significant because it was a clear message to the LC's and SO's that the BSA intends to survive even if it means throwing them under the bus. I learned from this discussion board that the LC's and the SO's are not indispensable because BSA can adopt a different model that does not utilize the LC/SO system e.g. Girl Scouts. 

The LC's can survive under this approach but it won't be pain free. I'm unsure how much of their asset values that they would have to surrender to settle, 40-50%?, but it won't be pain free as they seem to have expected up to now.

I would hope to see all the dead wood on the National Board and the local boards cleared away and new leadership installed.