Effective Insurance Neutrality Language Deprives Insurers of Standing in Delaware

The case of In re Leslie Controls Inc adds to the growing precedent in the Third Circuit that effective insurance-neutrality provisions will deprive a debtor's insurers of standing to object to a plan of reorganization proposed pursuant to 11 USC § 524(g). Plan language that is properly crafted...

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Bibliographic Details
Published in:American Bankruptcy Institute journal 2011-02, Vol.30 (1), p.32
Main Authors: Harron, Edwin J, Kohut, Sara Beth A R
Format: Article
Language:English
Subjects:
Asbestos
Bankruptcy
Bankruptcy reorganization
Committees
Engineering
Evidence
Hearings & confirmations
Insurance agents & brokers
Insurance coverage
Insurance policies
Language
Petitions
Provisions
Settlements & damages
State court decisions
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Summary:The case of In re Leslie Controls Inc adds to the growing precedent in the Third Circuit that effective insurance-neutrality provisions will deprive a debtor's insurers of standing to object to a plan of reorganization proposed pursuant to 11 USC § 524(g). Plan language that is properly crafted to preserve insurer rights and defenses for post-confirmation coverage litigation in a nonbankruptcy forum will be deemed neutral, therefore eliminating any standing that insurers otherwise may have to object to the plan, and even to participate in the confirmation hearing. Third Circuit precedent generally held that "insurance neutrality" exists when a plan has no adverse effect on the rights, defenses or obligations of the debtor's insurers. Leslie premised its insurance-neutrality language on that approved in In re Combustion Engineering Inc. In an attempt to address the insurers' concerns, Leslie broadened the neutrality provisions to incorporate language that one of Leslie's insurers had negotiated and agreed to in In re G-1 Holdings Inc.
ISSN:1931-7522