The United States Bankruptcy Court for the District of New Jersey rejected the pre-packaged bankruptcy plan presented by the debtors and asbestos claims representatives. In re Congoleum Corp., No. 03-51524, 2007 WL 328694 (Bankr. D.N.J. Jan. 26, 2007). In addition, the court rejected a plan proposed by a group of insurers. In re Congoleum Corp., No. 03-51524, 2007 WL 328700 (Bankr. D.N.J. Feb. 1, 2007).

The Court of Appeals for the Sixth Circuit held that no exception exists to Tennessee’s general prohibition on direct actions against an insurer, even in cases where the insured has declared bankruptcy triggering an automatic stay before a judgment in the underlying action.  Mauriello v. Great American E&S Insurance Co., 2014 WL 321921 (6th Cir. Jan. 30, 2014).  In so holding, the Sixth Circuit reasoned that an adequate remedy remains notwithstanding the automatic stay for a claimant to obtain a judgment against a bankrupt insured.

The United States District Court for the Eastern District of California, applying California law, has concluded that it should exercise jurisdiction under the federal Declaratory Judgment Act to determine the availability of coverage for a written demand and has held that the related coverage action should not be stayed in favor of potential future underlying litigation between the Federal Deposition Insurance Corporation (FDIC) and the insureds because the outcome of the coverage litigation would not be dependent on resolution of disputed facts in such a future action.  Progressiv

The United States District Court for the Southern District of Ohio, applying Ohio law, has held that a dishonesty exclusion barred coverage under primary and excess directors and officers (D&O) policies for the Wrongful Acts of the principals of a bankrupt company, all of whom were criminally convicted of securities fraud and related crimes.  The Unencumbered Assets Trust v. Great American Insurance Co., et. al., 2011 WL 4348128 (S.D. Ohio Sept.

The United States Court of Appeals for the Third Circuit, applying New York law, has held that an inadequate consideration exclusion unambiguously bars coverage for a lawsuit arising out of a debt restructuring transaction. Delta Financial Corp. v. Westchester Surplus Ins. Co. (In re Delta Financial Corp.), 2010 WL 1784054 (3d Cir. May 5, 2010).

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 United States District Court for the Southern District of Texas, applying federal law, has reversed a bankruptcy court's ruling that the proceeds of an E&O liability policy were property of a bankruptcy estate. In re Burr Wolff, LP, 2007 WL 2964835 (S.D. Tex. Oct. 10, 2007). The court held instead that the issue was not ripe for adjudication because a declaratory judgment action concerning the insurer's obligations under the policy was pending, and thus "no proceeds" were currently available.

In an April 24, 2007 order, the United States Bankruptcy Court for the District of Delaware granted certain insurers' motion for leave to pursue a coverage action against the debtor, Federal-Mogul Global, Inc., in New York state court regarding the debtor's asbestos liability. In re Federal-Mogul Global, Inc., No. 01-10578 (Bankr. D. Del. Apr. 24, 2007). The insurer had filed a declaratory judgment action in New York state court against the debtor. In response, the debtor filed an identical action in New Jersey state court.

The United States District Court for the Eastern District of Virginia, applying Texas law, has held that a settlement agreement resolving coverage litigation released the insurer’s obligation for defense costs for certain claims tendered for coverage under a subsequent policy.  Nat’l Heritage Found., Inc. v. Philadelphia Indem. Ins. Co., 2012 WL 5331570 (E.D. Va. Oct. 25, 2012).