Diocese of Harrisburg tort claimants committee files Chapter 11 plan

By Sarah Lizee

Olympia, Wash., Jan. 10 – The official committee of tort claimants for the Roman Catholic Diocese of Harrisburg filed a Chapter 11 plan and related disclosure statement on Friday with the U.S. Bankruptcy Court for the Middle District of Pennsylvania.

According to the disclosure statement, the plan establishes a trust funded by assets of and contributions from the diocese; contributions from the parishes, schools, and related non-debtor entities; contributions from insurers; and contributions from the self-settled trusts.

The diocese will transfer $4 million within two days of confirmation, and $3.4 million in three equal annual payments, with the first payment one year after confirmation.

The diocese will also transfer to the trust all rights and interests it may have in any proceeds of any insurance policies or certificates of insurance issued by or underwritten by any person other than the insurers, and any claims for those proceeds or claims or causes of action for breach of those policies or certificates or bad faith, wrongful failure to settle, or any similar claim or cause of action, which will include the claims filed by the diocese in the insolvency proceedings of Stronghold Insurance Co. Ltd. and CX Reinsurance Co. Ltd.

The parishes, schools and related non-debtor entities will transfer $500,000 to the trust within two business days after confirmation.

Six insurers will contribute a combined amount of $18.31 million. The amount will be transferred to the trust within 10 days from the effective date of the plan, at the latest.

The Roman Catholic Diocese of Harrisburg Real Estate Trust and the Roman Catholic Diocese of Harrisburg Charitable Trust will each contribute $5 million to the trust within two business days after the effective date in exchange for the releases provided to them.

The trustee will liquidate the trust assets and distribute the proceeds to the survivor claimants, under the allocation protocol contained in the trust distribution plan.

The plan further provides that the holders of the general unsecured claims will be paid in full, that all survivor claims will be channeled to the trust, and that the diocese will receive a discharge from all remaining claims.

Administrative expense claims, professional fee claims and priority tax claims will be paid in full in cash.

Other priority claims will be paid in full or receive other treatment that leaves the claims unimpaired, including reinstatement.

Holders of other secured claims will receive payment in full in cash, the collateral securing their claims, or other treatment that leaves the claims unimpaired, including reinstatement.

The holder of proof of claim 34, a known survivor claim, will receive $650,000 prior to any distribution to the holder of any other claims entitled to a distribution under the plan.

Holders of known survivor claims other than the holder of proof of claim 34 will receive payments from the trust. The trust will be funded through the insurance settlement agreement. No known survivor claimants will receive any payment on any award unless and until they have executed a release of all claims against the insurers, diocese, and any other protected party.

The debtor will pay all unknown survivor claims and late-filed survivor claims as determined by the unknown claimants’ representative. No claimholders will receive any payment on any award unless they execute the release.

In addition, holders of known, unknown and late-filed survivor claims, including the holder of proof of claim 34, will also be entitled to receive, if they provide the release of liability, one cemetery plot at any diocese cemetery of their choice, or a credit for one fully-paid K-12 education at schools within diocese. The claimholder may freely assign these rights to a beneficiary as they see fit.

The holder of the pension plan note claim will receive treatment as agreed to between the diocese and the priest pension plan.

The parishes and schools will make their contribution to the trust in exchange for the releases provided to the parishes and schools as part of the plan. To maximize recovery for survivor claimants, the parishes and schools waive all rights to distributions on account of their claims. As such, there will be no distribution to holders of parish and school claims.

The diocese filed bankruptcy on Feb. 19, 2020 under Chapter 11 case number 20-00599.

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