The relatively small Roman Catholic diocese of Covington, Ky., said yesterday that it has agreed to create a record-setting $120 million fund to settle a class-action lawsuit over sexual abuse by priests.

The potential payout by the northern Kentucky diocese, which has about 90,000 parishioners, is 40 percent larger than the $85 million settlement negotiated in 2003 by the Boston Archdiocese, which has 2.1 million Catholics. The previous record was a $100 million settlement reached by the diocese of Orange County, Calif., in December.

"This is a very important and in many ways unprecedented result in an extremely difficult matter," Stanley Chesley, the lead attorney for the plaintiffs, said in a statement.

But lawyers and victims' advocates said there is a fundamental difference between the Covington settlement and other large settlements across the country. The fund created by the Kentucky diocese is the maximum amount it will have to pay. Depending on how many alleged victims come forward, it may spend less than the full $120 million. Any unused money will revert to the diocese.

Under the terms of the settlement, which still must be approved by a court, claimants will be divided into four categories based on the nature and severity of the abuse they suffered. Compensation will range from $5,000 to $450,000, minus court-ordered attorneys' fees.

Despite the size of the fund, the payments are likely to be considerably lower per person than in some other recent settlements. The 87 plaintiffs in the Orange County case, for example, will receive between $500,000 and $4 million each.

William McMurry, a plaintiffs' lawyer in Kentucky who was not involved in the lawsuit, said he considered the announcement of the $120 million figure to be "misleading and irresponsible." McMurry settled a class-action lawsuit against the neighboring Louisville Diocese in 2003 for $25.7 million, which was divided among 243 sex-abuse victims.

"It's unfair to victims all across America to suggest that 100 or 200 victims in Covington are going to share $120 million, when in fact they will receive far less," he said. "To jump out into the news media with these numbers creates false expectations among victims and a sense of remorse and unhappiness among those who have already settled."

Tim Fitzgerald, a spokesman for the Covington diocese, said the announcement was necessarily imprecise because the number of eventual plaintiffs is unknown. Only the 10 plaintiffs who originally filed the lawsuit in February 2003 have been named. But under the class-action procedure certified by a judge in October 2003, everyone who was abused as a minor by a priest or deacon in the diocese over the past 50 years is automatically a member of the class, unless they opted out of the settlement in writing before Jan. 31, 2004.

According to the diocese's most recent public report, it has received 205 allegations against 35 priests, nearly 10 percent of the 364 priests who have ever worked for the diocese. Sixteen of the accused priests are dead; five have been laicized, or defrocked; and 14 have been permanently removed from ministry but remain priests, the diocese said.

Nationally, a study released in February 2004 by the U.S. Conference of Catholic Bishops found that about 4 percent of all U.S. priests since 1950 have been accused of sexual abuse of children. The nation's 195 dioceses collectively have paid about $900 million in settlements and related expenses, and three dioceses -- Portland, Ore.; Tucson; and Spokane, Wash. -- have sought bankruptcy protection. U.S. dioceses temporarily removed more than 300 accused clergy members and defrocked 148 in 2004 alone, according to the bishops conference.

Separately from the class-action lawsuit, the Covington diocese said this year that it had spent $4 million from its reserves over the past 18 months to settle 56 individual sex-abuse claims.

In yesterday's announcement on its Web site, the diocese said it will seek $80 million for the compensation fund from its insurance companies and promised to sue those companies if necessary to force payment.

It said the other $40 million will come from "a combination of investments and real estate" held by the diocese, including the possible sale of its diocesan office building, a former seminary on more than 200 acres in Erlanger, Ky., about eight miles south of the city of Covington. That property, as well as two other parcels owned by the church, will initially be placed in escrow, it said.

"After personally meeting with more than 70 victims, I am painfully aware that no amount of money can compensate for the harm these victims suffered as innocent children," Bishop Roger Foys said in a written statement. "Nevertheless, I pray that this settlement will bring some measure of peace and healing to victims and their loved ones."

In austerity measures announced last month, Foy said the diocese will move its headquarters to a vacant floor of a Catholic hospital, saving $300,000 a year. He also has made plans to eliminate 15 of its 65 full- and part-time positions, according to Fitzgerald, the diocesan spokesman.

Susan Archibald of Louisville, president of the Linkup, a national sex-abuse victim group, said the pattern of abuse and coverup in Covington did not appear to be better, or worse, than in most other dioceses across the country.

"I don't see that Covington has any uniqueness in terms of the abuse that's been uncovered," she said. "I think what's made a big difference in the settlement is the class-action approach."

Bishop Roger Foys expressed sympathy.