In this opinion, the Court of Chancery denied a motion for judgment on the pleadings by certain asbestos claimants (the “Claimants”) seeking appointment of a receiver under 8 Del. C. § 279, holding that the dissolved corporation was not amenable to suits commenced more than ten years after its dissolution and, therefore, the insurance liability contracts held by the dissolved corporation were valueless, rendering appointment of a receiver unnecessary.  The Court also granted an opposing motion for summary judgment on behalf of the dissolved corporation. 

"Does an insurance broker, after procuring an insurance policy for a developer on a construction project, owe a duty to apprise a subcontractor that was later added as an insured under that policy of the insurance company's subsequent insolvency?"

In this issue of first impression in California, the Fourth District Court of Appeals said "no." Pacific Rim Mechanical Contractors, Inc. v. Aon Risk Insurance Services West, Inc. --- Cal.Rptr.3d ----,2012 WL 621346 (Cal.App.4 Dist.).

In this memorandum opinion, the Court of Chancery denied a motion filed on behalf of a dissolved corporation to dismiss a petition for the appointment of a receiver under 8 Del. C. § 279, ruling that the petitioners might “conceivably” demonstrate entitlement to such appointment in light of their factual allegations concerning the dissolved corporation’s “plan of dissolution” under 8 Del. C. § 281(b). The Court also granted the petitioners’ motion to perfect service upon the dissolved corporation and denied the motion to dismiss for insufficiency of service of process.

The State of New Jersey Appellate Court ruled that the final dividend plan (“FDP”) proposed by the liquidator for Integrity Insurance Company (“Integrity”) was invalid in part because incurred but not reported (“IBNR”) claims were improperly included in the valuation of claims by its policyholders. As background, Integrity wrote umbrella and excess liability insurance policies which covered long-tail liabilities prone to significant IBNR. These underlying policies were reinsured by various companies. In 1987, Integrity was placed into liquidation with over 26,000 policyholder claims filed.

The United States Bankruptcy Court for the Southern District of New York granted preliminary injunctions ordering a directors and officers liability insurer to advance defense costs, despite the fact that the insurer had denied coverage, and without adjudicating the coverage defense. Axis Reinsurance Co. v. Bennett et al., Adv. No. 07-01712 (S.D.N.Y. Bankr. Aug. 31, 2007); Grant v. Axis Reinsurance Co., Adv. No. 07-2005 (S.D.N.Y. Bankr. Sep. 11, 2007). The bankruptcy court applied New York law and relied heavily on the case In re WorldCom, Inc.

In an important recent decision of the United States Court of Appeals for the Second Circuit, testing the outer reaches of a bankruptcy court’s jurisdiction, In re Johns Manville Corp., 06-2099 (2d Cir. Feb. 15, 2008), the court considered whether claims that are not derivative of a debtor’s liability, but rather seek to recover directly from an insurer for its own alleged misconduct, can be enjoined by the “channeling” mechanism developed by the bankruptcy court.

The United States Bankruptcy Court for the Southern District of New York has granted another preliminary injunction ordering an excess directors and officers liability insurer to advance defense costs, despite the fact that the insurer had denied coverage on the basis of a prior knowledge exclusion and three of the insured entity's principals have pled guilty to various offenses, including violations of the securities laws. Murphy v. Allied World Assurance Co. (U.S.), Inc. (In re Refco, Inc.), No. 08-01133 (Bankr. S.D.N.Y. Apr. 21, 2008).

The United States Court of Appeals for the 11th Circuit, applying Illinois law in an unpublished decision, has held that Celotex's failure to provide its excess insurers notice of lawsuits claiming more than $2 billion in property damage until after Celotex entered bankruptcy precluded coverage for asbestos-related property damage under numerous policies. Asbestos Settlement Trust v. Cont'l Ins. Co. (in re Celotex Corp.), No. 06-15748, 2008 WL 2637094 (11th Cir. July 7, 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.

The Ninth Circuit Court of Appeals has held that an insured vs. insured exclusion bars coverage for a suit by a debtor-in-possession against former directors and officers of the company. Biltmore Assocs. v. Twin City Fire Ins. Co., No. 06-16417, 2009 WL 1976071 (9th Cir. July 10, 2009). The court rejected the argument that the debtor-in-possession was a different legal entity from the pre-bankruptcy company insured under the policy.