The United States Court of Appeals for the Third Circuit recently upheld a $182.9 million judgment against PricewaterhouseCoopers, LLP (“PWC”) for allegedly contributing to the failure of Ambassador Insurance Company (“Ambassador”) through negligent auditing. Thabault v. Chait, No. 06-2209 (3d Cir., Sept. 9, 2008).

In a recent decision of the United States Court of Appeals for the Eighth Circuit, the court reversed a ruling against a D&O insurer in a coverage action arising from a bankruptcy case. In re: SRC Holding Corp., Nos. 07-1327/1335 (8th Cir. Oct. 27, 2008). Click here to read the Eighth Circuit's decision.

We previously posted on March 17, 2008 about a bankruptcy judgment in favor of a reinsured, Acceptance Insurance Companies, Inc. (“Acceptance”), which sought to be excused from the payment of $9 million in premium owed to its reinsurer for the remaining term of a five year contract because it had ceased writing the underlying crop insurance which was the subject of the reinsurance contract.

On November 25, LandAmerica Financial Group, Inc. (“LandAmerica”) filed a Chapter 11 petition in Virginia, seeking bankruptcy protection. By separate agreement (the “Stock Purchase Agreement”), LandAmerica agreed to sell Commonwealth Land Title Insurance Company (“Commonwealth”) to Chicago Title Insurance Company (“Chicago Title”) and Lawyers Title Insurance Company (“Lawyers”) and United Capital Title Insurance Company (“United”) to Fidelity National Title Insurance Company (“Fidelity”).

Late the night of Nov. 25, LandAmerica Financial Group, Inc. and its subsidiary, LandAmerica 1031 Exchange Services, Inc., filed a Chapter 11 petition in the U.S. Bankruptcy Court for the Eastern District of Virginia ("Bankruptcy Court"), seeking bankruptcy protection for both entities. The action does not cover Commonwealth Land Title Insurance Company or Lawyers Title Insurance Company, two LandAmerica subsidiaries that are each domiciled in the State of Nebraska.

Sellers should be proactive in taking steps to protect themselves from a distressed buyer’s non-payment.  

In the current economic downturn, sellers are dealing with many formerly good customers whose financial health is deteriorating. To protect their interests, sellers should assess their rights under applicable contracts and law and develop a strategy to minimize their exposure.

Step 1 – Assess the Parties’ Contractual Rights

*As seen on Bankruptcy Law360.

A federal bankruptcy court, applying New York law, has dismissed an adversary proceeding brought by a bankrupt home mortgage company against its directors and officers liability insurers, holding that coverage for a pre-petition lawsuit against the mortgage company was barred by application of an “inadequate consideration” exclusion. Delta Fin. Corp. v. Westchester Surplus Lines Ins. Co., Case No. 07-11880 (CSS) (Jointly Administered) (Bankr. D. Del. Dec. 15, 2008). The court also held that the coverage dispute was a non-core proceeding.

The “Ades” and “Berg” groups of investors (the “Ades Berg Group”), were parties who joined in the bankruptcy proceedings of the Bennett Funding Group, Inc. and related companies (the “Bennett Group”), based on claims that, among other things, the Bennett Group had defrauded them in an investment scheme. The Bennett Group was insured under a reinsurance contract issued by Sphere Drake Insurance PLC (“Sphere Drake”). A settlement was reached in the course of the bankruptcy proceedings between some groups of investors and Sphere Drake.