The Bankruptcy Appellate Panel of the Ninth Circuit has affirmed the bankruptcy court’s grant of a motion by a debtor’s sole director to modify the automatic stay to allow payment of defense costs under the A-side coverage of the debtor’s directors and officers liability insurance policy. In re MILA, Inc., 2010 WL 455328 (B.A.P. 9th Cir. Jan. 29, 2010).

On Friday, American International Group, Inc. (AIG) released its results for the fourth quarter and full year 2009. AIG reported a Q4 net loss of $8.9 billion, bringing 2009’s total net losses to $10.9 billion.

Kemper has been on the brink of insolvency for years. It may have finally reached the end of its runway. Last week, Kemper disclosed its most recent financials, which show that very little cash is left in its two major member companies, raising the specter that it may finally be placed into a liquidation proceeding. Policyholders should be aware of the ramifications of a Kemper liquidation and take steps, if possible, to mitigate the impact a Kemper liquidation could have on their businesses.

In this long-running legal saga surrounding the liquidation of Midland Insurance Company (“Midland”), the Superintendent of Insurance, Midland’s reinsurers, and certain major policyholders stipulated to a case management order for determining the issue of whether New York substantive law controlled the interpretation of the Midland insurance policies at issue or whether the New York choice-of-law test must be conducted for each policy to determine the applicable substantive law.

The FDIC has adopted final rules which provide that the FDIC, as receiver of a covered financial company, may recover from senior executives and directors who were substantially responsible for the failed condition of the company any compensation they received during the two-year period preceding the date on which the FDIC was appointed as receiver, or for an unlimited period in the case of fraud.

The Federal Deposit Insurance Corporation (“FDIC”) has approved a final rule authorizing it to clawback any compensation senior executives and directors received within two years of the FDIC being appointed receiver, if the FDIC finds they were “substantially responsible” for the failed condition of a covered financial company. Of particular concern, the rule (implementing section 210(s) of the Dodd-Frank Act):

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.

An Illinois circuit court entered an order for the liquidation of Reinsurance Company of America based upon a finding of insolvency. The court appointed Michael T. McRaith, Illinois Director of Insurance, as liquidator, vesting him with broad powers to take action as required to serve the interests of RCA, its policyholders, beneficiaries, creditors, and the public. RCA’s sole stockholder consented to the entry of the order.

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

On July 25, 2011, JPMorgan Bank filed a third-party complaint against the FDIC in the Southern District of Ohio, claiming the FDIC indemnified JPMorgan when it agreed to buy assets from Washington Mutual, which went bankrupt in 2008.  JPMorgan alleges that it only accepted certain narrow WaMu liabilities in its agreement with the FDIC, specifically excluding liabilities relating to WaMu's pre-closing activities.  Western and Southern Life Insurance Company has since sued JPMorgan for fraudulent misrepresentation in connection with the sale of $650 million in mortgage-backed securi