By Martin Moylan

MPR News/90.1 FM

The Archdiocese of St. Paul and Minneapolis is about to move a step closer to emerging from bankruptcy.

By the end of the month, the archdiocese will file a bankruptcy reorganization plan detailing how it expects to remain a financially viable organization while providing compensation for victims of clergy sex abuse.

The proposal will likely be controversial.

The archdiocese has been in bankruptcy for about 16 months and insurers, parishes, abuse victims and other parties have been in mediation during most of that time. The parties involved were told to keep talks confidential. But there are indications that critical matters, especially insurance coverage, remain unresolved.

At a late March court hearing, archdiocese attorney Richard Anderson told a federal judge that a plan would include financial contributions from the archdiocese and insurers. But he didn’t offer details and said the church could file a plan without first securing the support of sex abuse victims.

That did not sit well with Mike Finnegan, an attorney for many of the victims.

“We would not look favorably at all on a plan that was filed without the survivors’ approval and definitely without the survivors being able to see it first,” he said. “If it is something that the survivors agreed to or that they thought we were going to agree, they would show it to the survivors first.”

The roughly 430 abuse survivors who’ve filed claims against the archdiocese survivors will decide whether a reorganization proposal is approved. They account for the vast majority of claimants who’ll vote to approve or reject the proposal.

The archdiocese has about $26 million in net assets. But much of that would not be available to abuse survivors and other creditors because of donor conditions and other restrictions.

The church has raised $8 million through the sale of the archbishop’s Summit Avenue residence and other property. But that’s about what the church has spent on legal and related costs of the bankruptcy.

If there’s substantial money for victims, it’d likely have to come from insurance. But insurers have contested their obligation to pay claims for abuse that occurred because of the church’s negligence.

“The insurers might have a very valid defense to the archdiocese claims on the policies,” said University of Minnesota law professor Christopher Soper.

Rather than contest their liability, he added, insurers might agree to significant payouts if that resolves existing cases, but they would want guarantees there’ll be no more insurance claims from the archdiocese and parishes for past clergy sex abuse cases.

The insurance companies would rather resolve all the policies all their outstanding liabilities to both the archdiocese and the parishes.