The United States District Court for the Eastern District of New York, applying New York law, has held that an insured did not violate an insurance policy's cooperation clause when it agreed, without providing advance notice to the insurer, to lift the automatic bankruptcy stay with respect to certain personal injury actions filed against it. Admiral Ins. Co. v. Grace Indus., Inc., 2009 WL 2222369 (E.D.N.Y. July 23, 2009).
The United States Court of Appeals for the 11th Circuit, applying Illinois law in an unpublished decision, has held that Celotex's failure to provide its excess insurers notice of lawsuits claiming more than $2 billion in property damage until after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).
The United States Court of Appeals for the Third Circuit, which has a track record of deciding major asbestos-bankruptcy issues, will hear the appeal of Hartford Accident & Indemnity Co. et al. v. American Capital Equipment, LLC et al. (In re American Capital Equipment, LLC et al.), No. 07-2546 (3d Cir.). This case presents issues regarding an insurer's ability to challenge a pre-packaged bankruptcy filed by policyholders solely to reach insurance proceeds, including whether such a filing is subject to dismissal for "bad faith" under the Bankruptcy Code.
The district court in Hartford Accident & Indemnity Company, et al. v. American Capital Equipment, et al., No. 06-0891 (U.S. Dist. Ct. W.D. Pa. May 11, 2007), affirmed that Skinner Engine Company's insurers have standing to move to dismiss Skinner's chapter 11 bankruptcy case and to challenge its bankruptcy plan. However, the court also affirmed the bankruptcy court's denial of the insurers' motion to dismiss the bankruptcy case.
On Monday, March 10, 2014, the companies that own and operate the Sbarro pizza chain, Sbarro LLC and 33 affiliates, filed for bankruptcy reorganization under Chapter 11 of the federal Bankruptcy Code. The Sbarro companies operate 217 restaurants in the U.S. and there are 582 franchised restaurants, 176 in the U.S. and 406 at international locations.
Applying Minnesota law, a federal district court has held that, where an entity’s principal shareholder was insolvent, but the entity was not, the individual’s insolvency could not be attributed to the entity for purposes of establishing Side A coverage for “Non-Indemnifiable Loss.” Zayed v. Arch Ins. Co., 2013 WL 1183952 (D. Minn. Mar. 20, 2013). The court further held that allegations of fraudulent inducement did not trigger an exclusion for claims “arising from” contractual liability, but that the claim was uninsurable as matter of law.
On March 9, 2012, Susheel Kirpalani, the court-appointed examiner for Dynegy Holdings LLC (Dynegy), concluded that the debtor's transfer of certain assets to its parent company, Dynegy Inc., prior to its bankruptcy filing may be recoverable as a fraudulent transfer. Kirpalani further determined that Dynegy's board of directors breached its fiduciary duty in approving the asset transfer. Dynegy Inc. vigorously disputes the examiner's findings.
A United States Magistrate Judge in the United States District Court for the Western District of North Carolina has denied a motion to compel discovery of all claims for which the insurer had denied coverage based on the desire of an insolvent insured to forfeit coverage.Lane v. Endurance American Specialty Insurance Co., 2011 WL 1791343 (W.D.N.C. May 10, 2011). The court granted, however, the plaintiff’s motion to compel the insurer to provide information about all other claims noticed under the policies at issue.
In a decision not designated for publication, the United States District Court for the Northern District of California, applying California law, has held that an insurer's declaratory judgment complaint for rescission effectuated the rescission of the policy and that the subsequent coverage litigation confirmed the validity of the rescission. In re Sonic Blue Inc., 2010 WL 2034798 (N.D. Cal. May 19, 2010).
In the last several months, a number of major mass media companies have filed for chapter 11 relief, including Ion Media Networks, Sun-Times Media Group, Tribune Company, Young Broadcasting and NV Broadcasting. With the economy still struggling to recover, and asset values continuing to decline, commentators speculate that even more mass media related bankruptcies are on the horizon. Certain aspects of a mass media bankruptcy present unique challenges for the various stakeholders due to the special regulatory requirements involved.