Justia Insurance Law Opinion Summaries

Joseph Terry, who received long-term disability benefits, filed a Chapter 7 bankruptcy petition. Terry later sued the bankruptcy trustee, seeking a declaration that his disability insurance provider, Standard Insurance Company, should not have reduced his benefits by the amount of certain "voidable" payments. The bankruptcy court ruled that Standard was precluded from recouping the payments. The bankruptcy appellate panel (BAP) reversed, holding that recoupment was subject to a a "balancing of the equities." On remand, the bankruptcy court found that the equities prevented Standard from recouping the payments. The Eighth Circuit Court of Appeals reversed, holding that the BAP (1) erred by introducing a balancing of the equities test into the doctrine of recoupment and by invoking these equitable principles to deny Standard a right of recoupment; and (2) abused its discretion in how it weighed the equities. View "Terry v. Standard Ins. Co." on Justia Law

Sandra Emas owned a life insurance policy issued by ReliaStar. The policy named her estate as the beneficiary. When Emas died intestate, she left her son, Jaysen McCleary, as her only heir. McCleary was appointed the administrator of his mother's estate. McCleary later filed for personal bankruptcy. McCleary, as the administrator of the estate, subsequently filed suit against ReliaStar, alleging that ReliaStar had wrongfully refused to pay the estate benefits under Emas's insurance policy. ReliaStar moved for summary judgment, arguing that Emas's interest in any cause of action against ReliaStar passed immediately to McCleary upon her death. The district court granted summary judgment in favor of ReliaStar. The Eighth Circuit Court of Appeals affirmed, holding (1) the estate was functionally closed, and McCleary could not bring a suit on behalf of a closed estate; and (2) there was not an issue of fact as to whether McCleary sold the estate's interest in his bankruptcy proceedings, as McCleary had the authority to sell the estate's interest in its claims against ReliaStar. View "McCleary v. Reliastar Life Ins. Co." on Justia Law

The company and its affiliates filed for Chapter 11 bankruptcy and sought to resolve asbestos-related liability through the creation of a personal-injury trust under 11 U.S.C. 524(g). As part of its reorganization plan, it sought to transfer rights under insurance liability policies to the trust. The Insurers had provided liability policies to the debtors prior to bankruptcy and objected that the transfer violated the policies' anti-assignment provisions. The bankruptcy and district courts held that 11 U.S.C. 1123(a)(5)(B) preempts those provisions. The Third Circuit affirmed. Section 524 trusts are the only national statutory scheme available to resolve asbestos litigation through a quasi-administrative process. The plain language of 11 U.S.C. 1123(a) evinces clear intent for a preemptive scope that includes transfer of property to a 524 trust; that preemption reaches private contracts enforced by state common law.

This case required the court to address the scope of federal bankruptcy jurisdiction over suits against non-debtor third parties, as well as the scope of a stay issued pursuant to 11 U.S.C. 524(g)(4). Pfizer and Quigley appealed from a judgment in the district court reversing the Clarifying Order of the bankruptcy court and holding that the Law Offices of Peter G. Angelos (Angelos) could bring suit against Pfizer for claims based on "apparent manufacturer" liability under Pennsylvania law. The court determined that it had jurisdiction to hear the appeal; that the bankruptcy court had jurisdiction to issue the Clarifying Order; and that the Clarifying Order did not bar Angelos from bringing the suits in question against Pfizer. Accordingly, the court affirmed the judgment of the district court.

Debtor appealed an order of the bankruptcy court sustaining the objection of the Chapter 7 trustee to her claimed exemption of her interest in an annuity. The court concluded that res judicata applied to the debtor's claim of an exemption; and even if res judicata did not apply the bankruptcy court properly disallowed the debtor's claimed exemption. The court also affirmed the bankruptcy court's decision on the bases that: (1) it properly determined that the record did not show that the Company was "authorized to do business" as a "stipulated premium" or "assessment plan" insurance company, as required for Mo. Rev. Stat. 377.330 and 377.090 to apply to the annuity; and (2) the annuity was not insurance, as required for any of the three statutes at issue.

Robert A. Sears appealed from a bankruptcy court order finding that the bankruptcy estate of AFY was contractually and equitably entitled to receive the cash value of a life insurance policy, owned by Sears and paid for by AFY, to reimburse AFY for policy premiums paid. The court held that the bankruptcy court possessed the jurisdiction and constitutional authority to enter final judgment and AFY was not contractually or equitably entitled to the cash value of the policy. Accordingly, the decision of the bankruptcy court was reversed.

Plaintiff, as trustee for a creditors' trust, held a $56 million stipulated judgment against Paul Yarrick, a former officer of Interstate Bakeries. Interstate emerged from a voluntary Chapter 11 bankruptcy reorganization. In the bankruptcy proceedings, the Trust obtained the right to bring the action that later resulted in the judgment against Yarrick. The Trust received this right in exchange for certain concessions, including an agreement to execute only against potentially liable insurers. After the Trust obtained the judgment against Yarrick, the Trust brought the present action against defendants in an attempt to collect against several director and officer policies that named Yarrick as an insured. The court held that, because the Assignment Agreement that transferred to the Trust the limited right to sue Yarrick for insurance proceeds "absolved" Yarrick from "payment," the $56 million judgment was not a "Loss" as required by the plain language of the policy. The court also rejected the abandoned-insurance argument and held that Missouri law did not allow estoppel to extend coverage over otherwise uncovered claims. Accordingly, the judgment of the district court finding no coverage and granting summary judgment in favor of the insurers was affirmed.

This case stemmed from a dispute between MBIA Insurance Corporation (MBIA) and certain of its policyholders who hold financial guarantee insurance policies. The principal question presented was whether the 2009 restructuring of MBIA and its related subsidiaries and affiliates authorized by the Superintendent of the New York State Insurance Department precluded these policyholders from asserting claims against MBIA under the Debtor and Creditor Law and the common law. The court held that the Superintendent's approval of such restructuring pursuant to its authority under the Insurance Law did not bar the policyholders from bringing such claims. Accordingly, the court held that the order of the Appellate Division should be modified, without costs, in accordance with the opinion.