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.

Pursuant to § 1104 of the United States Bankruptcy Code, the court may appoint a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. A qualified examiner, with a clearly defined mission, can drastically affect the outcome of the bankruptcy case and directly impact the return to creditors. The difference between a successful financial restructure or liquidation and an investigation yielding little value to the creditors often depends on the approach taken by the examiner and his professionals.

The dispute over the disposition of customer records held by the "Clear" airport traveler program casts a spotlight once again on the handling of consumer personal data when a business falls on hard times. In such circumstances, the desire of the debtor to preserve or maximize the value of its business assets can conflict with legitimate privacy interests of individuals who were customers of the business.

The deepening international financial crisis and tightening credit market has led to a substantial increase in business bankruptcy filings. While the number of commercial bankruptcies has been increasing since 2007, business chapter 11 filings surged to even higher levels in the third quarter of 2008. In Delaware and the Southern District of New York, where many commercial cases are filed, business chapter 11 filings more than quadrupled from just over 100 in the third quarter of 2007 to almost 450 in the third quarter of 2008.

Recent news reports have focused on the problems of the financial markets on the one hand and consumer mortgage problems on the other. While Congress may yet grant authority to bankruptcy judges to modify home loans, modification of business loan facilities of all sizes remains available as a powerful and fundamental tool to be used in a business financial restructuring.

In two related actions, the United States Bankruptcy Court for the District of Delaware ruled that the proceeds of a D&O policy are not property of the debtor's estate and refused to grant an injunction requested by a trustee to prevent the directors and officers from consummating a settlement that would exhaust the policy limits.

On June 4, 2014, the New York Court of Appeals will hear arguments arising from the bankruptcies of two law firms—Thelen and Coudert Brothers—as to whether the former partners of the bankrupt law firms must turn over profits earned on billable-hour client matters they brought to their new firms.

Buyers of assets through the bankruptcy court process seek comfort and solace in the entry of a sale order providing for the transfer of assets “free and clear” of all liabilities. Except for those liabilities expressly assumed by the buyer and new owner, the bankruptcy court order typically includes exacting and precise language transferring those assets, under the imprimatur of the United States Bankruptcy Court, free and clear of all liabilities.

Applying Georgia law, the United States Bankruptcy Court for the Northern District of Georgia has voided a surplus lines policy on the grounds that the insured, a purported hedge fund management firm, concealed that it was operating a Ponzi scheme, submitted an inaccurate financial statement, and misrepresented that its investment funds were “stable.”Perkins v. Am. Int’l Specialty Lines Ins. Co., 2012 WL 2105908 (Bankr. N.D. Ga. Apr. 3, 2012).

The United States Bankruptcy Court for the District of Delaware, applying federal law, has held that certain lawsuits brought by a bankruptcy trustee were related claims, even though they alleged unique causes of action, because they were based upon the same course of conduct.  The court also found that the trustee was pursuing claims both on behalf of the policyholder-debtor and its subsidiaries, and therefore the application of the insured versus insured exclusion was “unclear.”  Nonetheless, the court found that the individual insureds were entitled to 100% of their defense cos