The Catholic Bishop of Northern Alaska (CBNA) has been directed to arbitrate an insurance dispute. The CBNA filed for chapter 11 bankruptcy relief as a result of sexual abuse lawsuits against it. In the course of its bankruptcy proceeding, it sought a declaratory judgment as against its insurer, Catholic Mutual Relief Society of America, concerning the scope of coverage for the abuse claims. Catholic Mutual asserted that CBNA’s settlement of the underlying claims was without Catholic Mutual’s consent as required by the policies, and therefore voided the policies, relieving Catholic Mutual of any coverage obligation. The policy for one year contained an arbitration provision, and Catholic Mutual moved to compel arbitration of the dispute with respect to all claims potentially covered under that particular policy. CBNA resisted arbitration, claiming the arbitration provision was unconscionable, as it required submission of any dispute to Catholic Mutual’s president, and thereafter, by appeal to the chairman of Catholic Mutual’s board, who would then select a committee from amongst board members, each of whom are archbishops or bishops. The Court held this provision was not unconscionable, since the board members were as likely to align, in terms of any potential biases, with Catholic Mutual’s policyholders, who are also bishops and archbishops, as with the insurer of which they are board members. In re Catholic Bishop of Northern Alaska, No F08-00110-DMD (USDC Bankr. Alaska Dec. 13, 2010).
This post written by John Pitblado.