A Georgia bankruptcy court has held that notwithstanding the discharge of an individual in his individual bankruptcy proceeding, the Federal Deposit Insurance Corporation (FDIC) may file suit against the individual as a former officer of a failed bank so long as the applicable D&O policy covers defense costs and the FDIC’s recovery is limited to insurance proceeds.  In re Hayden, 2012 WL 3597422 (Bankr. N.D. Ga. July 6, 2012).

The U.S. Bankruptcy Code provides for the appointment of a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. The right examiner, with a clearly defined mission, will have a major influence on the bankruptcy process. The difference between a successful financial restructuring or liquidation-resulting in substantial recoveries for the key constituencies-and a time-consuming (and asset-consuming) meltdown, can depend on the approach of the examiner and the examiner's support team.

As a result of the meltdown of the financial markets, lenders are severely constricting new credit facilities and refusing to renew expiring facilities. The Bankruptcy Code's chapter 11 provides a powerful mechanism for an otherwise viable business to restructure and extend its outstanding debt and in many cases, reduce interest rates on loan facilities.

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 Bankruptcy Court for the District of Delaware, applying federal law, has held that a Liquidation Trustee and a Litigation Trustee (the Trustees) did not have standing to object to the disbursal of policy proceeds in an insurer’s interpleader action because they had no existing claims or realistic potential claims for coverage under the policy. Federal Insurance Co. v. DBSI, Inc., 2012 WL 2501090 (Bankr. D. Del. June 27, 2012).

The United States Bankruptcy Court for the District of Delaware has held that policy proceeds were not part of the insured entity’s bankruptcy estate because previous entity claims were dismissed with prejudice, it was highly speculative that the bankruptcy trustee would approve indemnification of directors and officers and the policy’s priority of payment provision provided that entity coverage was only available after payment of proceeds for direct coverage to insured persons. In re Downey Fin. Corp., 428 B.R. 595 (D. Del. Bankr. May 7, 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 nature of online commerce requires the collection of information from individuals to identify the parties to individual transactions, transfer funds for payment, and ensure the delivery of the goods or services being acquired. Public concern about the potential for abuse of such information by online merchants gave rise to the development of so-called "privacy policies" that provide a measure of reassurance that information collected will be protected from unauthorized use and disclosure.

In the ongoing bankruptcy action involving the Congoleum Corporation (Congoleum), the bankruptcy court refused to approve a settlement and policy buyback between Congoleum and one of its insurers, ruling that the lack of creditor support for the settlement and the lack of evidence regarding the volume and type of claims covered by the settlement precluded the court's ability to approve the settlement. In re Congoleum Corporation, No. 03-51524 (Bankr. D.N.J. May 11, 2004).