Tuesday, June 1, 2021
One of the biggest recent nonprofit stories has to be the Boy Scout bankruptcy. A lot of the issues are beyond my expertise; like most (I suspect) tax and nonprofit people, I'm not an expert in bankruptcy. And since BSA is a federally-chartered nonprofit, I've been told the issues it faces are somewhat unique.
But they're not entirely unique; in large part, its creditors (who in this case are victims of sexual abuse) are trying to maximize their recovery. In the interest of doing so, about a week ago the creditors sent a letter to the judge trying to resolve a discovery issue. Bloomberg Law has a discussion of the letter here. But a quick summary:
Basically, on of the Boy Scouts' main assets to pay victims' claims is its insurance. A number of the claims are covered by the Insurance Company of North America. The Insurance Company of North America restructured in the 1990s, though. While the surviving companies still have to pay, they claim they lack the ability to fully (or, it appears, even substantially) pay the necessary claims.
This has ripple effects in excess of merely reducing the pot paid by the restructured insurance company. If the survivors reduce their settlement with the Insurance Company of North America for less than $1.3 billion, it will reduce the amount another insurance company has to pay by 50 cents for every dollar below $1.3 billion.
Samuel D. Brunson