During the course of the bankruptcy procedures, the Debtors negotiated “buyback” settlements with three of their primary insurance carriers for approximately .5 million.
The Debtors did not reach a “buyback” settlement with Continental, their only other primary insurance carrier.
Continental further argues that the Trust must assign to Continental only that portion of each claim for which Continental would have financial responsibility under a equitable contribution action.
The Trust contends that the Plan is clear and simply provides that the Trust is to make a proposal to Continental regarding the allocated percentage of the liquidated value of the claims for which Continental is responsible.
Under Illinois law, “the right to contribution is an equitable principle arising among co-insurers which permits one who was paid the entire loss to receive reimbursement form another insurer liability for the loss.” According to Continental, the Trust was required to perform an equitable contribution analysis for Continental’s benefit because the Trust is holding the Insurance Fund created by the sale of the settling insurance policies, and in effect, stands in their shoes.
The court rejected Continental’s argument that the Trust was theoretically the other insurer and found that neither §8.3 or the “other insurance” clause imposed the burden on the Trust to conduct an equitable contribution analysis.
The Bankruptcy Court agreed with the Trust, finding Continental’s interpretation to be “contrary to the plain and obvious meaning of the language in §8.3.” First, the court found that “allocate” is a word with a commonly understood meaning – to assign.The Debtors were defendants in numerous personal injury and wrongful death lawsuits and had purchased third party liability insurance policies from a number of insurers.When the Debtors filed for bankruptcy in 2001, they had not yet exhausted their primary and excess insurance policies for the relevant coverage periods.Stays of Litigation The Order of Liquidation purports to stay litigation against Lincoln General not just in Pennsylvania, but also “elsewhere.” Because the stay is issued by a state court in Pennsylvania, it does not actually stay litigation in other jurisdictions.Under principles of comity, however, some federal courts and courts in other states will stay litigation in their jurisdictions.