Churches Weigh Options as Important Nov. 16 Deadline in Boy Scouts Bankruptcy Approaches

by John Litzler on October 26, 2020 in News

Boy Scouts of America (BSA) is one of the oldest and largest youth organizations in America. Founded in 1910, BSA grew to 2.6 million members in 2013. Many of these members participated in local boy scout troops that did not own a building in which to hold meetings. For decades, churches routinely opened their doors and allowed Boy Scouts to meet at church-owned facilities. Over the last decade, however, as claims of sexual abuse have mounted, BSA has seen its membership decrease while churches began to cut ties with the organization. Last December, the Church of Jesus Christ of Latter-day Saints officially ended its century old partnership with BSA. The Mormon church had been BSA’s largest partner with 1 in 5 Scouts being members of the Church of Latter-day Saints.

This February, facing over 300 lawsuits from men saying they had been sexually abused in scouting programs affiliated with the organization, BSA filed for Chapter 11 bankruptcy in Delaware. Chapter 11 of the United States Bankruptcy Code allows a debtor to reorganize its debts, assets, and business affairs. The BSA bankruptcy places all the litigation pending against it on hold while a settlement is being negotiated. Additionally, as part of its reorganization bankruptcy, BSA is creating a Victims Compensation Trust from which victims will be paid. However, only those claims submitted by November 16, 2020 will be eligible to receive funds from the Trust. In recent weeks, additional sexual abuse claims have surged as victims file claims in an attempt to preserve their rights before the November 16 deadline. While BSA hasn’t revealed how many claims have been submitted to the bankruptcy court, “Abused in Scouting”, a coalition of law firms representing alleged victims, claims to cumulatively represent over 10,000 clients and anticipates representing as many as 50,000 clients prior to the filing deadline. The potential scope of the BSA bankruptcy is massive. Here’s what churches should know.

How Might the BSA Bankruptcy Affect Churches?

Many churches across the United States allowed Boy Scout Troops to use their facilities for meetings. These churches did not exercise control over the troop or its adult volunteers. They also did not supervise the troop meetings or supervise the youth participating in the event. Even so, churches can expect to be named as a defendant in any potential lawsuit a former troop member brings against BSA and any of its local councils and volunteers. As a condition to use the church premises for meetings, churches often require the organizations using the church facilities to indemnify the church. An indemnity or “hold harmless” agreement protects the church from potential claims and liability related to the use of the property by the other organization. If a church had an indemnity agreement with BSA, that agreement could be “wiped out” as part of the Chapter 11 bankruptcy and the creation of the Victims Compensation Trust.  

As part of its bankruptcy, BSA seeks to “discharge all obligations and liabilities of and bar any recovery or action against the Protected Parties for or in respect of all Abuse Claims, including all Indirect Abuse Claims.” An Indirect Abuse Claim includes any claim for indemnity that that “is attributable to, arises from, is based upon, relates to, or results from, an Abuse Claim.” In other words, a church’s indemnity agreement with BSA may constitute an indirect abuse claim if the reason the church is seeking protection is from an abuse claim made by a former Boy Scout. This means that churches have until November 16 to assert these indirect abuse claims. Unfortunately, many churches simply don’t and can’t know whether they need to assert an indirect abuse claim. This is because these churches don’t know whether a former Boy Scout who attended meetings on church premises has or intends to file an abuse claim against BSA.

Further complicating the matter, according to the BSA website, local Boy Scout Councils are independent, separate, and distinct from BSA as a national organization. While BSA as a national organization has been besieged by lawsuits and abuse claims, many local councils have not had claims made against them. While BSA’s assets and debts are currently being restructured in bankruptcy proceedings, the assets and debts of a local council are not directly affected. This means that whether the church had an indemnity agreement with a local council, BSA, or both could be of critical importance.

What Can Churches Do?

If your church has hosted BSA troop meetings at any point in the past several decades and it has concerns about the bankruptcy proceedings and influx of new sexual abuse claims, here are some steps the church can take.

·Review any written agreements with BSA and/or local Boy Scout Councils to see if there is an indemnity, hold harmless, defend, name as additional insured, or similar provision that might protect the church in the event it is sued.

·Contact your church’s  insurance company to see what they recommend. They may have an attorney referral or other resources to assist your church in filing a claim in the BSA bankruptcy case.

·Document the conversation with the insurance company (date, time, name of representative, etc.). Even if the insurance company does not recommend filing a claim or have resources for you, just alerting them to the potential liability can preserve the church’s right to insurance coverage in the event it is sued.

·Contact a bankruptcy attorney to assist the church in determining whether it should file a claim in the BSA bankruptcy case in Delaware prior to the November 16 deadline.

Churches want to be generous with tools for ministry God has provided the congregation, including making church facilities available to organizations and programs seeking to do good and show love in the community. Unfortunately, the BSA bankruptcy also highlights potential pitfalls that can emerge when churches allow outside organizations to use church facilities. When allowing other organizations or individuals to use church property, it is prudent for churches to develop a facilities use policy and enter into facilities use agreements that provide contractual protection and reduce liability for the church. You can find resources to help your church be a good steward of its property on the Texas Baptist church administration page here.

Attorney John Litzler directs the church law division of Christian Unity Ministries in San Antonio. He also serves as a BGCT legal consultant to assist Texas Baptist churches in understanding various legal issues.

Disclaimer: This article and any resources linked in this article provide general information and a general understanding of the law and does not constitute specific legal advice. By utilizing the Texas Baptist website, you understand that there is no attorney/client relationship between you/your church and the author or between you/your church and the Baptist General Convention of Texas. This article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state with the specifics of your situation.

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