The Effect of Bankruptcy on Insolvency Clauses in Insurance Policies: De Facto Pre-emption of State Law or the Mother of All Direct-action Statutes?
Part 2 of 2
by Leonard P. Goldberger Esq.
Stevens & Lee P.C., Philadelphia
Introduction1
Part 1 concluded with the question: Under what conditions will courts modify the discharge injunction in a confirmed plan so as to not render a covered claimant’s rights under an insolvency clause in an insurance policy a hollow remedy? The answer – more lore than law – appears to depend on how courts balance the competing interests of the various parties under the circumstances of the particular case. (This should not come as a surprise to anyone familiar with the willingness of bankruptcy courts to exercise broad equitable powers in aid of reorganization.) In the absence of guidance at the circuit court level, however, the resolution of the conflicting policies underlying bankruptcy and insurance law is likely to continue on a case-by-case basis.
Recent Developments Affecting Mass Tort Cases - Highlights from the 2005 Mid-Atlantic Bankrtupcy Workshop
Using Chapter 11 to Litigate Your Asbestos Liabilities Away – Is It Permissible?
by Peter Van N. Lockwood
In several pending asbestos bankruptcies (USG Corp., W.R. Grace and GI Holdings), the debtors are attempting to effectively disallow large numbers of present and future asbestos personal injury claims through litigation procedures that would be unavailable outside bankruptcy. See, e.g., Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997) (factual differences among asbestos personal injury claimants preclude use of Rule 23 class action procedures to resolve a defendant’s liability). See, also, Cimino v. Raymark Indus. Inc., 151 F.3d 297 (5th Cir. 1998) (rejecting a procedure to impose results in asbestos cases based on trials of test cases of the same general kind).
Lessons Learned from In re Combustion Engineering Inc.
by Natalie D. Ramsey
In reversing confirmation of Combustion Engineering's reorganization plan, the U.S. Court of Appeals for the Third Circuit clarified the law in three areas of importance to all asbestos bankruptcy cases and of application to all mass tort bankruptcies: (1) jurisdiction of the bankruptcy court over disputes in which the debtor is not a party, (2) the power of the bankruptcy court under §105 of the Bankruptcy Code and (3) what conduct constitutes bad faith requiring denial of the confirmation.
Recent Developments Affecting Mass Tort Cases
by Mark D. Plevin
Insurance often plays a key role in asbestos-related bankruptcies. Under many plans, liability insurance (and/or the right to receive the proceeds of liability insurance) is the principal asset of the trust established under §524(g) of the Code to pay asbestos claims following confirmation of a plan. It is not uncommon to see reorganization plans in asbestos bankruptcies that contain a wide variety of provisions directly relating to insurance.
Learn more about GET INVOLVED!—ABI’s new professional development initiative.