Posts tagged Bankruptcy.
Time 3 Minute Read

The United States Supreme Court recently accepted review of In re Kaiser Gypsum Co., Inc., 60 F.4th 73 (4th Cir. 2023), a Fourth Circuit decision concerning “whether an insurer with financial responsibility for a bankruptcy claim is a ‘party in interest’ that may object to a Chapter 11 plan of reorganization.” This issue, while one of first impression for the SCOTUS, has been litigated several times in the appellate courts, leading to a circuit split over the interplay between Article III and 11 U.S.C. Section 1109(b). 

Time 4 Minute Read

Last month, the United States Court of Appeals for the Second Circuit upheld the Southern District of New York’s award of over $2 million to policyholder, Fabrique Innovations, Inc., against its ocean cargo insurance carrier, Federal Insurance Company.

Federal issued an “all-risk” ocean cargo insurance policy to Fabrique for fabric and plush merchandise “temporarily in storage” at a warehouse owed by Hancock Fabrics. Fabrique’s goods were lost when Hancock liquidated its holdings—including Fabrique’s merchandise—as part of Hancock’s bankruptcy proceedings. Following the loss, Fabrique filed a claim under its policy with Federal. Federal denied the claim, citing various exclusions, including an exclusion for “loss, damage or expense caused by or resulting from willful misconduct, fraud or deceit,” which the insurer argued was triggered due to Hancock’s sale of the goods in violation of the parties’ third-party logistics agreement.

Time 4 Minute Read

In another pro-policyholder ruling in Delaware, a Delaware Superior Court judge has denied a group of insurers’ application for certification of interlocutory appeal in the long-running D&O dispute, Verizon Communications Inc. et al. v. National Union Fire Insurance Co. of Pittsburgh, PA, et al., C.A. No. N18C-08-086 EMD CCLD (Del. Super. March 16, 2021). The court’s most recent decision arises out of a February 23 ruling that Verizon could recover $24 million in legal fees incurred in defense of a fraudulent transfer lawsuit brought by a bankruptcy trustee. When the insurers’ sought to appeal this interlocutory decision, the court refused, concluding that the benefits of an immediate appeal, if any, do not outweigh the probable costs. The decision will permit the orderly resolution of what the court deemed to be “standard contract law principles,” which the insurers had failed to demonstrate negated coverage.

Time 1 Minute Read
Much of the commentary on insurance issues arising from the COVID-19 crisis, including multiple posts on this blog, understandably has focused on recovery under first-party property policies providing business interruption coverage for losses incurred due to office closures, government orders, extra expenses, and other direct costs experienced by employers. There is a much broader range of possible claim scenarios arising from COVID-19 that may go to other kinds of coverages, however; most notably directors and officers liability, management liability, fiduciary ...
Time 2 Minute Read

Insurance companies can become insolvent. This is an ongoing issue in Puerto Rico following hurricanes Irma and Maria. In addition to Real Legacy Assurance Company’s insolvency, Puerto Rico’s Insurance Commissioner reportedly fined various insurers for delays in handling claims. Even if your insurance company is insolvent, it may have purchased reinsurance. While the general rule is that a policyholder cannot make a claim directly against the reinsurer, there are exceptions to the rule. One such exception is when the reinsurance contract contains a “cut-through” ...

Time 3 Minute Read

In MF Global Holdings Ltd. et al. v. Allied World Assurance Co. Ltd. et al., No. 1:16-ap-01251 (Bankr. S.D.N.Y. Aug. 24, 2017), the United States Bankruptcy Court for the Southern District of New York ordered MF Global Holdings Ltd. and Allied World Assurance Co. Ltd. to arbitrate their $15 million errors-and-omissions coverage dispute in Hamilton, Bermuda. MF Global initiated an adversary proceeding against Allied World in the bankruptcy court after Allied World had refused to pay MF Global for amounts that MF Global returned to its customers' accounts as part of a settlement of claims against MF Global's former managers and directors. Allied World denied coverage under its "Bermuda Form" errors-and-omissions policy, claiming that this procedure was tantamount to deposit insurance, and not professional liability insurance, which is what errors-and-omissions coverage typically provides.

Time 3 Minute Read

A case decided last week by the Sixth Circuit illustrates the importance of seeking bankruptcy claim policy amendments when placing D&O coverage. Indian Harbor Ins. Co. v. Zucker (6th Cir. Jun. 20, 2017) involved the application of the insured-vs.-insured exclusion and specifically, whether the policy’s insured-vs.-insured exclusion precluded coverage for a claim brought by a company’s liquidating trust, to which the company’s claims had been assigned by the company as debtor-in-possession after the company filed for bankruptcy. After the company’s claims were assigned to the liquidating trust, the trustee sued several of the company’s former executives for breach of fiduciary duty.

Time 1 Minute Read
Hunton partner, Syed Ahmad , was quoted yesterday in a Law360 feature discussing how corporate policyholders can maximize their D&O insurance coverage. As Ahmad explains, "[g]iven the ever-changing regulatory landscape, directors and officers are getting involved in matters earlier and earlier and in a wider range of situations than before.” As a consequence, directors and officers should be looking for insurance that affords the broadest possible protection against the most diverse range of claims that the company is likely to face. One way to achieve this is use of a broad ...

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