In response to a rehabilitation plan for Delaware insurance company Manhattan Re proposed by its receiver, American Motorists Insurance Company (a reinsurer of Manhattan Re) filed objections with the Delaware Court of Chancery. AMICO argued that the plan should be rejected because the receiver improperly intended to dispose of certain cash holdings that AMICO claimed constituted cash collateral under its reinsurance agreements with the company.

In a suit between a bankruptcy trust established to resolve a defunct corporation’s asbestos-related personal injury liabilities and the corporation’s excess liability insurer that had denied coverage to the trust in connection with the asbestos claims, a court resolved various attorney client privilege and work product protection issues. The insurer had sought various documents related to the handling of the underlying asbestos claims by the trust, among others.

Following removal to federal district court of an action against AIG, defendants petitioned to refer the case to the district’s bankruptcy court. Plaintiffs’ claims arose out of a reinsurance arrangement between AIG and non-party The Robert Plan Corporation, who were engaged in the automobile insurance business. After a dispute regarding administration of the reinsurance treaties, plaintiffs – “family members and former shareholders” of TRP – allege TRP agreed to accept a certain sum as payment pursuant to AIG’s allegedly fabricated representations about its loss reserves.

Everest Reinsurance Company intervened in the liquidation proceedings of Midland Insurance Company, and moved to have the anti-suit injunction vacated, in order to allow it to participate in the claims settlement process, and to interpose defenses. The trial court denied the motion, and Everest appealed. The appellate court affirmed, finding Everest’s defenses were premature, as none of the relevant claims had yet been approved, and because adequate procedures existed for it to interpose defenses later in the process.

Lexington Insurance Company participated in a tower of coverage for Dresser Industries, a manufacturer of asbestos-containing products that was forced into bankruptcy by the multi-billion dollar exposure it faced arising from product liability litigation against it. In the context of the bankruptcy proceeding, Dresser commenced an insurance coverage action against its various liability insurers.

For some years, companies in the United Kingdom have utilized a statutory process called solvent schemes of arrangement. These schemes amount to what in the United States is called a “cram down” voluntary reorganization of financially distressed, but solvent, debtors. They impose upon creditors reductions in the amount owed to them outside the U.S. Bankruptcy Code. Rhode Island adopted a similar statutory scheme, which became effective in 2004.

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.

Rhode Island recently amended its Credit for Reinsurance Act to include two provisions regarding credits for reinsurance relating to the insolvency of the ceding insurer.

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 a matter of first impression under New Jersey law that potentially impacts both the reinsurance and insurance industry and policyholders of insolvent insurance companies, the New Jersey Supreme Court affirmed the appellate division's ruling that the Fourth Amended Final Dividend Plan (the "FDP") proposed by the Liquidator for Integrity Insurance Company ("Integrity") should not be approved because it unlawfully allowed incurred but not reported (“IBNR”) claims to share in the insolvent insurer's estate. See In the Matter of the Liquidation of Integrity Ins.