THE BIG PICTURE: Insurers to USA Gymnastics’ & survivors’ request for forced settlement conference: stop the “rank speculation and baseless accusation”

The tug-of-war in the Nassar abuse survivors case is now between USA Gymnastics and the Survivors Committee on one side and the myriad insurers in the case on the other!

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Shortly after Monday’s story on the joint motion of USA Gymnastics and the sexual-abuse Survivors Committee asking U.S. Bankruptcy Court Judge Robin Moberly to force a settlement conference, long-time athlete’s rights attorney David Greifinger suggested:

“The demand for a settlement conference as framed appears to be a strategic tactic by the victims and USAG to set the insurers up for bad-faith claims. That gets you past the policy limits, especially if policy-limit demands were made and rejected.”

He was proved right in the succeeding hours as the insurers struck back, sometimes in very plain language, opposing the motion, and especially the demand that the insurance company chief executives personally participate. Highlights:

TIG Insurance Company “respectfully states” that the Motion is trash:

“Movants premise their motion on grounds found somewhere in the fog between rank speculation and baseless accusation. Any suggestion that TIG did not comply with the Court’s June 19, 2020 Order (both with respect to submission of a confidential meaningful settlement offer prior to the mediation and direct participation at the mediation on August 11 and 12, 2020 by representatives with ultimate settlement authority) is not based on the true facts. Movants cite – and can cite – no facts that support such a suggestion. There is no basis for so accusing TIG, let alone grounds for ordering TIG’s CEO to participate directly in a court-ordered settlement conference.”

And the TIG reply crucially added this paragraph, getting to the heart of the matter:

“Successful settlement negotiations require all parties’ meaningful participation, and the Joint Motion noticeably omits any discussion of the Movants’ own obligations and conduct. The June 19 Order likewise required the Committee to make a meaningful demand. Without divulging mediation details in breach of mediation privilege, it is clear that the parties continue to have a fundamental disagreement regarding the appropriate range for resolution of these claims.” (Emphasis added)

Replied ACE American Insurance (formerly Chubb):

“To the extent the Motion’s allegations are directed at ACE, USAG and the Committee have no basis to allege that ACE acted in ‘bad faith.’ ACE fully complied with the Court’s order requiring a ‘meaningful’ settlement offer, within the terms of the coverage that ACE underwrote and the limitations of that coverage, including those limitations addressed by the Court’s ruling of November 14, 2019 … . USAG also has no basis to allege that the ACE representatives who attended the August 11 mediation lacked full authority (although again, it is unclear if this allegation is directed at ACE in the first instance), or that ordering a higher-ranked executive would accomplish anything other than harassment.”

Opined the Great American Assurance Company:

“[T]he terms that Debtors and the [Survivors Committee] have proposed are aimed at gaining leverage for litigation; they are neither reasonably calculated to advance settlement prospects nor are they appropriate under these circumstances. The Court should not grant the relief in the form that Movants have requested here.”

Per Liberty Insurance Underwriters:

“The fact that USAG’s insurers did not offer amounts that USAG and the Committee are willing to accept does not mean that they violated this Court’s order directing the mediation, failed to make meaningful settlement offers, or are acting in bad faith to delay this case, as the Motion claims. It just means that the insurers have a different view of the merits of this case, whether as to the merits of the claims of Nassar’s victims or as to the insurance coverage issues.

“Instead of facing that possibility, USAG and the Committee have violated the mediation privilege in order to present vague (and unsubstantiated) claims about the insurers’ (including, presumably, LIU’s) participation in the mediation. But LIU cannot respond to these claims without violating the mediation privilege.”

Declared National Casualty Company:

“[T]hrowing the Appointment Order and related confidentiality provisions to the wind, the Debtor and the Committee filed a Motion requesting that this Court interject itself anew into the mediation process and schedule a settlement conference, based on false, unfounded, and/or self-serving characterizations that breach this Court’s confidentiality orders.”

Stated National Union Fire Insurance Company:

“In their Joint Motion, the Debtor and the Survivors’ Committee attempt to enlist the Court to inappropriately influence the parties into a unilateral settlement based on terms that only USAG and/or the Survivors’ Committee deem appropriate. Over the course of the last year, National Union has actively participated in good faith in six separate mediation sessions, attending each time with fully informed corporate representatives vested with full authority to resolve the claims asserted against the Debtor that fall within National Union’s policy period.

“Despite this record of good faith active engagement in settlement discussions, the Debtor and the Survivors’ Committee baselessly assert in their Joint Motion that ‘the carriers have acted in bad faith,’ and contend therefore that the insurance carriers’ chief executive officers should be required by the Court to personally attend their requested settlement conference. That request in the Joint Motion is legally and factually unsupported and should be denied.”

And its brief also added:

“[D]uring the entirety of the ongoing mediation, both the Debtor and the Survivors’ Committee have consistently rebuffed National Union’s attempts to directly and meaningfully engage, with the lone exception of a brief discussion between Debtor’s counsel and National Union’s counsel toward the close of the January 2020 mediation session.”

Noted Virginia Surety Insurance (formerly Combined Specialty Insurance):

“In order to avoid violating the mediation privilege, Combined Specialty will not be drawn into discussing what, to its knowledge, in fact took place in the most recent mediation sessions.

“We can state unequivocally that Combined Specialty approached and participated in those sessions in good faith. The mediators who presided over the mediations sessions never suggested otherwise. Therefore, there is no basis to support the unorthodox request that the CEO responsible for the Combined Specialty policies at issue, is a necessary participant or would add anything to the settlement process.

“That said, Combined Specialty has no objection to this Court participating in future settlement talks in this case. Such involvement, though, may preclude the Court’s involvement in certain other contested matters in the case such as disputed coverage issues in this case.”

There were additional replies, including from the U.S. Olympic & Paralympic Committee, stating that it would join a Court-ordered settlement conference if requested to do so.

Several of the insurers noted with care a significant issue that may be the key in Wednesday’s hearing (26th) on the matter: whether the Bankruptcy Court is, in fact, not involved in other aspects of the case. While the Bankruptcy Court will not hear the sex-abuse claims, it continues to be in the middle of multiple claims by insurers against USA Gymnastics as to what they actually owe under their policies. Those decisions will eventually determine the actual amount of money to be available to the survivors in either a settlement, or in individual trials.

Some of the insurer replies suggested that another set of mediators be appointed, or perhaps a federal magistrate, but not Judge Moberly.

Greifinger identified with precision the tactic at work here: charge the insurers with bad faith and try to force them to meet the demands by the Survivors Committee, which are apparently well in excess of the $217.125 million on the table since January’s proposed re-organization plan.

Moberly will hear the matter tomorrow at 1:30 p.m. by videoconference. Stay tuned!

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