The speakers for this panel were Scott Bogucki of Gleichenhaus, Marchese, Weishaar & Bogucki, PC. (Buffalo, N.Y.), Craig Geno of Law Offices of Craig M. Geno, PLLC (Ridgeland, Miss.), Matthew Hale of Stichter, Riedel, Blain & Postler, P.A. (Tampa, Fla.), Michael Lessne of Lessne Law (Fort Lauderdale, Fla.) and J. Ryan Yant of Carlton Fields, P.A. (Tampa, Fla.)

Newsletter
The committee published two newsletters recently: in April 2024, with an article Statutory Construction Governs the Appointment of an Examiner written by Leslie R. Hendrix of the U.S. Bankruptcy Court for the District of Arizona, and in November 2024, featuring an article A Primer on Discharge Exceptions for Subchapter V Professionals by Brandon E. Lira of Dinsmore & Shohl LLP.

The committee looks forward to producing additional newsletters in 2025 and welcomes suggestions and submissions.

Listserve
The committee puts out a periodic listserve to discuss current events and various relevant topics of interest, and looks forward to continuing to do so in 2025. Below is an example of August’s topic:

On August 20, 2024, an attorney analysis from Westlaw Today looked at the Supreme Court’s decision on insurance neutrality and its impact on mass tort bankruptcies. Prior to the U.S. Supreme Court’s decision in Truck Ins. Exch. v. Kaiser Gypsum Co., 144 S. Ct. 1414 (2024), debtors and creditors in chapter 11 bankruptcies were able to avoid confirmation hurdles from insurance companies as long as the plan was “insurance-neutral.” Most courts have held that a plan is insurance-neutral as long as it does not impact the rights of the insurers under their insurance policies. The underlying theory was that an insurance company was not a party in interest when the “plan neither increase[s the insurance company’s] prepetition obligations nor impaire[s] its rights under the insurance contracts.” Truck Ins. Exch., 144 S. Ct. at 1420. By proposing an insurance-neutral plan, debtors and creditors were able to negotiate without insurance company input and therefore confirm a plan in a more expeditious manner.

That plan analysis changed with the Supreme Court’s Truck Ins. Exch. decision. In the underlying bankruptcy case, Truck Insurance was the primary insurer for two companies that filed for bankruptcy due to asbestos-related lawsuits. The two companies sought to confirm a plan that included a channeling injunction that would establish an asbestos personal-injury trust. The trust would resolve the asbestos claim liability, and Truck would provide the major funding of the trust.

Truck objected to the plan, asserting that the plan was not proposed in good faith, impermissibly altered Truck’s contractual rights, and failed to comply with § 524(g) to deal equitably with claims and future demands. The bankruptcy court and the district court overruled Truck’s objection. The courts held that Truck was not a party in interest with respect to approval of the plan, because the plan was insurance-neutral.

The Supreme Court, however, held that “any insurer with a financial responsibility for bankruptcy claims is a ‘party in interest’ under § 1109(b) that ‘may arise and may appear and be heard on any issue’ in a Chapter 11 case.” Id. at 1417. The Court reasoned that based upon the text and history of § 1109(b), the statute was meant to create inclusion and greater participation during a chapter 11 bankruptcy. The Court then held that the doctrine of insurance neutrality was incorrect because it conflated an objection with the threshold issue of a party-in-interest determination. Moreover, the Court held that the insurance-neutrality doctrine was too limited in scope because it ignored all the other ways a bankruptcy plan can alter and impose obligations on insurers.

Accordingly, the authors reasoned that after Truck, debtors in a mass tort bankruptcy can expect insurance companies to rely on Truck and seek enhanced protections in a plan. Nevertheless, the authors also pointed out that the Supreme Court in its analysis of § 1109(b) only held that it provided parties in interest an opportunity to be heard, not a vote or veto in the bankruptcy case. Thus, they reasoned that where the Supreme Court did not speak to the validity of any insurance company’s objection, any objection would have to be resolved on a case-by-case basis.

The authors further noted that the decision would increase the costs in a mass tort bankruptcy. While debtors and creditors share a common goal of resolving a bankruptcy quickly, so creditors get paid and debtors emerge from bankruptcy, insurance companies have a competing interest. Drawing out the bankruptcy process delays the time when insurers must pay and it also stays the underlying litigation, which stops the obligation to pay defense costs. Moreover, adding the insurance company to the bankruptcy negotiations increases costs, because it adds an additional stakeholder with a different financial incentive.

In conclusion, the authors provided strategies for debtors to deal with insurers. They assert that debtors should engage with insurers and remind them that while Truck gave insurers a voice, it did not give them any special rights that did not exist in the Bankruptcy Code. Further, insurance companies have duties of good faith and fair dealing, and therefore, debtors should develop a record of showing their good-faith negotiations. Debtors will want to position themselves as playing things “down the middle” and balancing various stakeholders. While every bankruptcy is different, debtors should also familiarize themselves with the applicable insurance law that applies to the policies, which varies state by state. The state law-specific questions involve numerous issues, and a debtor’s ability to know and understand how the specific body of law intersects with the Bankruptcy Code is critical [in order] to preserve and maximize an insurance asset.

What are your overall thoughts? Do you agree with the authors’ analysis and conclusions? Please feel free to reply all and provide feedback.

Membership Activities
The committee welcomes new members and encourages involvement in the various initiatives of the committee. There are ample opportunities for committee members — particularly younger members — to speak, write and organize events of interest focused on commercial and regulatory matters in the insolvency realm. The committee also hosted a happy hour at the 2024 Winter Leadership Conference.

The committee hosts a monthly call to discuss ongoing efforts and strategize.

• Co-Chairs
  • Alan Rosenberg, Markowitz Ringel Trusty + Hartog | Miami
  • April Wimberg, Dentons Bingham Greenebaum | Louisville, Ky
• Communications Manager
  • Leslie Hendrix, U.S. Bankruptcy Court (D. Ariz.) | Phoenix
• Education Directors
  • Travis Powers, Hogson Russ LLP | Buffalo, N.Y.
  • Camisha Simmons, Simmons Legal PLLC | Dallas
• Membership Relations Director
  • Morgan Patterson, Womble Bond Dickinson (US) LLP | Wilmington, Del.
• Newsletter Editor
  • Joanna Caytas, Quinn Emanuel Urquhart & Sullivan | Houston
• Special Projects Leader
  • Michael Lessne, Lessne Law | Fort Lauderdale, Fla