The Appellate Court of Illinois, First District, Third Division, applying Indiana and federal law, has held that neither a bankruptcy nor an insured versus insured exclusion applied to bar coverage for claims brought by a bankruptcy trustee.  According to the court, the bankruptcy exclusion is unenforceable because coverage arises from a policy that is a property interest of the debtors, and that property interest is protected under Section 541 of the Bankruptcy Code.  The insured versus insured exclusion did not apply, the court held, because the policyholder and a court-appointe

While 90 percent of life may be just showing up, showing up late may be just as bad as never showing up at all. Just ask two creditors who were told for the second time they cannot file claims in the Lehman Brothers bankruptcy case because they filed their claims too late.

The United States District Court for the Central District of California has granted motions by eight directors and officers liability insurers to withdraw the reference to the bankruptcy court of two coverage actions involving coverage for claims against former directors and officers of a bank holding company.  In re IndyMac Bancorp, Inc., Nos. CV11-02600; CV11-02605; CV11-02950; CV11-02988 (C.D. Cal. May 17, 2011).  Wiley Rein LLP represents an excess insurer and the primary Side A insurer in the litigation.

The United States Bankruptcy Court for the District of Nevada has held that proceeds from a professional liability policy were not property of the insured-debtors' bankruptcy estate because the proceeds were payable only for the benefit of third party claimants and could not be accessed by the debtors directly.  In re Endoscopy Center of Southern Nevada, Nos. BK-S-09-22780-MKN, S-09-22776-MKN, S-09-22784-MKN, 2011 WL 2184387 (Bankr. D. Nev. May 23, 2011).

A recent New York bankruptcy case holds that the Bankruptcy Code's limitations on using avoidance actions to undo securities transactions did not apply where the underlying transactions did not implicate the public securities market. A debtor or bankruptcy trustee has the power and obligation to recover transfers made by the debtor, prior to the commencement of the bankruptcy case, that were either actually or constructively fraudulent. There are, however, certain enumerated limitations to this power.

A United States Magistrate Judge in the United States District Court for the Western District of North Carolina has denied a motion to compel discovery of all claims for which the insurer had denied coverage based on the desire of an insolvent insured to forfeit coverage.Lane v. Endurance American Specialty Insurance Co., 2011 WL 1791343 (W.D.N.C. May 10, 2011). The court granted, however, the plaintiff’s motion to compel the insurer to provide information about all other claims noticed under the policies at issue.

Wiley Rein LLP partner H. Jason Gold, the chapter 11 bankruptcy trustee in the mortgage fraud and Ponzi scheme case of Vijay Taneja, announced today that he has reached settlements with 11 defendants in the 60 lawsuits he filed last year seeking to recover tens of millions of dollars for the benefit of Mr. Taneja's creditors.

Trustees play a critical role in the bankruptcy process.

Island One, Inc. to Emerge from Bankruptcy

The United States District Court for the Northern District of California, applying California law, has granted summary judgment in favor of a bankruptcy plan administrator for the estate of an insured, holding that the plan administrator is entitled to recover premiums paid to an insurer after the insurer rescinded the policy. In re SONICblue Inc., 2011 WL 839401 (N.D. Cal. Mar. 4, 2011). The court also held that the insurer is entitled to reimbursement for defense costs paid to the insured prior to the policy’s rescission.