Tort claimants have urged a New York bankruptcy judge not to hear insurers' objections to claims in the Chapter 11 of the Roman Catholic Diocese of Albany, challenging the companies' position they have a financial stake in the court's decision on whether to allow the claims.

In responses filed on Friday, the bankrupt diocese's official committee of tort claimants and two insurers expanded on arguments that began over the summer on whether the policy providers are parties in interest under the U.S. Bankruptcy Code with standing to challenge proofs of claim.

The tort committee argued that while two insurance companies could potentially be on the hook for the Chapter 11 claims, they don't have a firm enough financial stake to establish standing. The insurers — London Market Insurers and Hartford — have asserted that potential financial harm under alleged indemnity is enough to make them parties in interest under the Bankruptcy Code.

Counsel for both insurers and the tort claimants' committee did not immediately respond to requests for comment on Monday.

The Roman Catholic Diocese of Albany filed for Chapter 11 in 2023 facing over 400 claims brought under New York's Child Victims Act, which opened a window for otherwise time-barred childhood sexual abuse litigation.

The diocese, its insurers and creditors, including the official tort claimants' committee, have been in mediation but have yet to reach a proposed Chapter 11 plan, according to court records.

U.S. Bankruptcy Judge Robert E. Littlefield Jr. in March agreed to lift bankruptcy's automatic stay to allow a handful of sexual abuse lawsuits to play out in state court, which the plaintiffs and tort committee argued would spur progress in mediation. Under Judge Littlefield's order, the state court "test cases" could continue to determine liability and calculate damages, but no judgment would be entered against the diocese.

Beginning in June, Hartford and LMI filed objections to 47 of the 438 proofs of claim filed in the Chapter 11 case by sexual abuse claimants. Those claims, the insurers contended in separate objections, could fall under policies they issued to the church. But, the insurers argued, they failed to state a claim under New York law because they either didn't allege the diocese had a duty to oversee the alleged abuser or knew about behaviors from the alleged perpetrator that put victims at risk.

The tort claimants' committee also objected, arguing the insurers didn't have standing to challenge claims in the Chapter 11 because they hadn't agreed to provide insurance coverage for the claims at issue — and a court had not ruled the policies covered those claims.

Judge Littlefield after a hearing in July directed the parties to file briefs addressing the insurance companies' standing to object.

LMI and Hartford in filings earlier this month asserted they are parties in interest under Section 1109(b) of the Bankruptcy Code since they could be financially impacted by the claims. The insurers argued they have the right to defend against claims covered by their insurance policies, which may include those filed in the case, and that they deserve to have their objections heard.

The committee in its own filings argued the insurers have not agreed to cover the claims at issue and that a court has not ruled their policies require them to, meaning they have a theoretical but not actual financial interest in the claims. The committee argued the insurers lack standing to object to the claims and urged the court not to consider the challenges.

Hartford, LMI and the committee in supplemental filings on Friday built on those arguments.

"If no party in interest objects to an invalid claim which the debtor tendered to Hartford, Hartford faces potential financial harm from being asked to pay an invalid claim," the insurer wrote in its Friday filing, noting that neither the church nor the committee has agreed to waive insurance coverage for the claims at issue.

LMI said the court should not limit an insurer's ability to object to the claim as a party in interest.

"Section 1109(b) provides that parties in interest 'may raise and may appear and be heard on any issue in a case under this chapter.' This right is an express congressional grant that cannot be nullified through judicial discretion," LMI argued.

The committee in its Friday filing asserted LMI and Hartford under their policies don't have any obligations to the diocese until claims are resolved and there's a decision on insurance coverage, which the group said has not happened yet.

"While their insurance policies may contain a duty to defend, reimburse and/or indemnify, neither Hartford nor LMI has been adjudicated to have such duties with respect to such claims. Nor is there a plan on file that might impact Hartford's or LMI's financial interests," the committee wrote.

The tort claimants committee is represented by Robert T. Kugler, Edwin H. Caldie, Andrew J. Glasnovich and Logan R. Kugler of Stinson LLP and Timothy W. Burns and Jesse J. Bair of Burns Bair LLP.

Hartford is represented by James P. Ruggeri, Joshua D. Weinberg, Annette P. Rolain and Anna Belle Reilly of Ruggeri Parks Weinberg LLP and Christopher A. Priore of Wilson Elser Moskowitz Edelman & Dicker.

LMI is represented by Russell W. Roten, Jeff D. Kahane, Nathan Reinhardt and Timothy W. Evanston of Skarzynski Marick & Black LLP and Catalina Sugayan and Yongli Yang of Clyde & Co LLP.

The diocese is represented by Francis J. Brennan and Matthew M. Zapala of Whiteman Osterman & Hanna LLP.

The case is In re: The Roman Catholic Diocese of Albany, New York, case number 1:23-bk-10244, in the U.S. Bankruptcy Court for the Northern District of New York.