This Time Is Different: Core Bankruptcy Jurisdiction for Insurance Coverage Lawsuits for Coronavirus-Related Claims (ICLC)

Insurance Coverage Law Center (ICLC)

  • Published On: April 2, 2020

When bankruptcy lawyers consider legal issues associated with how a debtor’s insurance assets are treated in a typical Chapter 11 reorganization (or even a Chapter 7 liquidation), they’re usually confronted with how to handle claims that might be covered by so-called “third-party” insurance policies. That is, in toxic tort cases (asbestos, medical device, other products liability matters), a debtor’s “general liability” insurance will provide coverage for claims against the debtor’s estate. In these cases, insurance policies are often placed into a reorganization trust for the benefit of creditors who are then left to fend for themselves against often recalcitrant insurance companies.

In the new world of COVID-19 business disruption, however, the insurance issues presented to current and not-yet debtors more commonly focus on first-party insurance policies. Those policies are designed to protect the actual “property” of the policyholder, and to provide a measure of safety so that business interruptions caused by covered events don’t result in the failure of their business. Similarly, companies that organize conferences, tournaments, and other commercial gatherings often purchase “event cancellation” insurance policies. Those policies are designed to provide direct payment to the policyholder for a covered “occurrence,” and consequently keep the policyholder company alive.

It will come as no shock to anyone familiar with the insurance industry that on occasion, when presented with an ostensibly covered claim, some insurance companies will declare the loss is not covered, or, even...

Published originally in the AK Policyholder Advisor/Alert, March 31, 2020

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