Executive Summary

On December 27, 2018, the United States Bankruptcy Court for the District of Delaware issued an opinion in In re La Paloma Generating Co., Case No. 16-12700 (Bankr. D. Del. Dec. 27, 2018) [Docket No. 1274], that should raise substantial concerns for junior secured creditors.

In particular, the La Paloma opinion determined that:

In Berryman v Zurich Australia Ltd [2016] WASC 196 it was decided that a bankrupt's entitlement to claim a TPD benefit under a life insurance policy is not an entitlement that is divisible amongst the bankrupt's creditors, and therefore such an entitlement does not vest in the Official Trustee in bankruptcy. Tottle J of the Supreme Court of Western Australia ruled that the bankrupt insured could continue an action in his own name to recover the TPD benefit. Life insurers may need to adjust their claims' payment practices in light of the Berryman decision.