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The Catholic Diocese of Duluth, headquartered at 2830 East Fourth Street in Duluth, filed for bankruptcy on Monday. The diocese covers 10 counties in northeastern Minnesota. Steve Kuchera /

Duluth diocese will pay abuse victims $40 million

DULUTH - The Diocese of Duluth has reached a settlement with 125 clergy sex abuse victims that is set to end years of litigation over insurance coverage and provide about $40 million to survivors.

The settlement was reached with a committee of abuse survivors that would allow the diocese to adequately compensate survivors and emerge from Chapter 11 bankruptcy. A disclosure statement and joint reorganization plan will be filed in U.S. Bankruptcy Court in the near future, the diocese said in a news release Wednesday morning, May 1.

Jeff Anderson and Associates, the St. Paul-based law firm that represents many of the abuse victims, supports the plan's terms.

"This is a big day for the survivors and the end of a long road," Anderson said. "We applaud the courage and patience of the survivors, who have handled this difficult process with grace and strength. They have accomplished so much for the protection of children and for themselves."

Once a bankruptcy judge approves the plan, the committee will then send ballots to each of the 125 survivors included in the settlement, who will vote on whether to accept the reorganization proposal.

The diocese itself will contribute more than $10 million toward the $40 million settlement, with insurers providing the remaining sum. The diocese anticipates contributions from nearly all of its 75 Catholic parishes as well as other Catholic entities, it said in the news release.

Of the total settlement, more than $39 million will go into a distribution trust for survivors upon conclusion of court proceedings. That process is expected to take three to four months, according to a news release from Jeff Anderson and Associates.

The diocese has been under bankruptcy protection since December 2015, when it filed a voluntary petition in wake of a $4.9 million jury verdict in the first case to go to trial under the Minnesota Child Victims Act, which opened a window for survivors of decades-old abuse cases to file suit.

The insurance lawsuit came six months later, significantly slowing the progress of the bankruptcy proceedings. The abuse claims date as far back as the early 1940s, prompting review of historical policies and challenges to each insurer's alleged coverage responsibilities.

A total of five insurance settlements have been reached and approved without objection.

Continental Insurance Co. is providing $15 million, nearly half of the total. Catholic Mutual Insurance Co. agreed to pay $8.95 million, Liberty Mutual Insurance Co. will pay $6.5 million, and Church Mutual Insurance Co. is contributing $250,000 to victims.

A $975,000 settlement with Firemen's Fund Insurance Co. was approved for the diocese to cover legal fees and other expenses involved in pursuing the insurance litigation.

Last year, the Archdiocese of St. Paul and Minneapolis reached a $210 million agreement with more than 400 victims who filed claims in its bankruptcy case, which was initiated nearly a year before the Diocese of Duluth's case.

The archdiocese is paying $40 million of that sum, while its insurers are contributing $170 million.