Insurers allege law firms filed false claims against Boys Scouts
Boy Scouts of America currently faces more than 95,000 sex-abuse claims as it fights with insurers to pay claims.
Insurance carriers potentially facing staggering losses as a result of the Boy Scouts of America bankruptcy are claiming in court documents that groups of plaintiffs lawyers from across the country have filed thousands of unvetted — and in some cases potentially fraudulent — civil claims against the organization, in part as a way to wield greater bargaining power during the proceedings.
The motions, filed in late January by insurance carriers Century and The Hartford, are asking the bankruptcy court in Delaware to allow for additional discovery into the methods attorneys used to process and submit claims into the bankruptcy litigation, including the attorneys’ use of lead generation and litigation funding companies. Several additional insurance companies have since joined the discovery requests.
Currently, the BSA, which is involved in Chapter 11 bankruptcy, is facing more than 95,000 civil claims from men claiming they were sexually abused by scout leaders. According to plaintiffs attorneys, the exposure for the carriers reaches into the billions.
The carriers’ motions seek discovery from attorneys based in Pennsylvania, New York, Texas and elsewhere. The lawyers, many of whom say they plan to file a formal response soon, have countered that the carriers’ allegations are inaccurate and an attempt to distract away from the abuse their clients suffered because of the BSA.
Similar disputes over plaintiffs firms’ use of litigation funding and lead generation companies have arisen over the past few years, most often in the mass tort context, with allegations arising in the Xarelto, Taxotere, and pelvic mesh litigations. However, it remains to be seen whether courts will become interested in digging into funding and lead generation issues. So far, courts by and large have been able to avoid ruling on the issues.
The insurers’ allegations
The insurance carriers’ motions focus in large part on two groups of firms, one called the Coalition of Abused Scouts for Justice and another called Abused in Scouting. The groups are aimed at representing thousands of claims collectively in the bankruptcy proceedings, with individual attorneys representing the claimants individually.
According to the carriers, the groups, with the Coalition at the forefront, “engineered an aggressive, nationwide campaign to generate claims that channeled respondents to a website with information that encouraged the presentation of seemingly plausible claims” in an effort to flood the docket and gain control of the bankruptcy. The move, they said, resulted in the number of civil suits swelling from 1,400 to 95,000.
“To accomplish this objective, a handful of Coalition lawyers signed thousands of proofs of claim (‘POCs’) in the days just before the bar date, and a dozen lawyers each signed hundreds of POCs in one day,” the carrier said. “Astonishingly, members of the entity that holds itself out as Abused in Scouting — a fictitious firm acting as a front for three separate firms, two of which are one-man shops and the other a nine-lawyer outfit— filed almost 19,000 POCs alone.”
One attorney from Missouri, Adam Krause of Krause and Kinsman, signed 809 proofs of claim in one day, the carriers alleged.
“Assuming an eight-hour workday with no breaks, Mr. Krause apparently executed one POC every 32 seconds,” the carrier said.
Krause did not return a call seeking comment.
In another instance, the carriers said a marketing firm submitted 400 forms for a law firm that, while purporting to be from different clients, all bore the same signature.
“This goes beyond sloppiness and suggests outright fraud or at least a complete disregard for checking the veracity of the submitted claims and the oath given in signing them,” the motion said.
Brown Rudnick attorney David Molton, who is representing the Coalition, however, sent a statement on behalf of the group, saying the insurance carriers’ “modus operandi … has been misdirection and attack.”
“Misdirection to remove focus from the horrible abuse inflicted on boys, and attack on those survivors and their advocates, their lawyers,” Molton said in the statement. “We are confident that this latest attack by the insurers against survivors and their advocates will fail as our Coalition continues to seek fair and equitable treatment and compensation for all survivors.”
The carriers’ motion cited numerous times to an email from Kosnoff in which the attorney said counsel for BSA was “wasting their time” talking to the bankruptcy’s tort claims committee and that his group should not do anything to “help grease the gears for [the counsel for the tort claims committee] and the dimwits including speeding up the insurance analysis.”
The carriers argued that the email showed the attorneys’ motives were to inflate the number of claims as a way to wrestle control from the tort claims committee, which typically guides the civil liability aspects of the bankruptcy.
In an interview, Kosnoff said the email was only intended for his group of attorneys, but he had accidentally replied all, which meant the email was inadvertently send to a broad swath of attorneys involved in the proceedings. Although the email included “salty language,” Kosnoff said, it did not cast doubt on the validity of the claims Abused in Scouting filed.
Kosnoff further said that most of the issues the carriers raised, such as questions about the client’s signature, were trivial and that, when faced with a client losing their rights to sue, attorneys should err on the side of their clients.
This article has been edited for length and clarity.
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