Carrier wins bankruptcy case with unanimous Supreme Court ruling

In a groundbreaking decision, the United States Supreme Court has unanimously ruled in favor of Truck Insurance Exchange (Truck) in a bankruptcy reorganization case involving Kaiser Gypsum Company, Inc. The court recognized Truck’s standing as a “party in interest” in the proceedings, overturning a previous ruling by the Fourth Circuit.

Kaiser Gypsum Company, Inc. and its parent company, Hanson Permanente Cement, Inc., filed for Chapter 11 bankruptcy due to massive liabilities from asbestos-related claims. As the primary insurer, Truck Insurance Exchange is potentially liable for millions of dollars in claims under its policies with Kaiser Gypsum.

Truck objected to the proposed reorganization plan, citing concerns about fraudulent claims and inadequate disclosure requirements. The Supreme Court’s decision emphasized that insurers with financial responsibilities, like Truck, have the right to be heard in Chapter 11 proceedings under the Bankruptcy Code’s Section 1109(b).

The ruling has significant implications for insurers, highlighting their role in bankruptcy cases where their financial interests are at stake. Insurers now have the right to actively participate in negotiations and raise objections to protect their interests against potentially harmful reorganization plans.

Key points from the decision include a broad interpretation of “party in interest,” recognition of the impact on insurers’ financial responsibilities, and the rejection of the “insurance neutrality” doctrine. Justice Samuel Alito did not participate in the case’s consideration or decision.

This decision underscores the importance of insurers’ involvement in bankruptcy proceedings to safeguard their financial interests and ensure fair treatment in reorganization plans.