December 16, 2011

Notwithstanding that 11 U.S.C. § 502(a) states that a claim is deemed allowed unless "a party in interest . . . objects," in a Chapter 7 case, the Chapter 7 trustee is the only party in interest with standing to object to claims unless the trustee declines to object to a particular claim and a party in interest obtains leave from the court to object to such claim.

If a Ch. 7 trustee withdraws a pending claim objection, no other party in interest is entitled to object to the subject claim.

December 14, 2011

As part of a settlement, a post-confirmation creditors trust and an insured director of a debtor entered into an "agreement not to execute" whereby the director admitted judgment for $56 million and the trust agreed to seek collection only from D&O policies.

When the insurer was presented with the $56 million claim, it asserted that there was no coverage because there was no "loss" under the policy language due to the agreement not to execute. The relevant policy language excluded from the definition of loss: "amounts "not indemnified by the Insured Organization for which the Insured Person is absolved from payment by reason of any . . . agreement." Due to the presence of this language, the district court did not err in finding that agreement not to execute destroyed coverage under the policy.

The trust also asserted that where an insurer contests coverage or wrongfully refuses to tender a defense, the insured may enter into a reasonable settlement discharging personal liability and empowering the plaintiff to seek recovery from the insurer. The court rejected this claim as well, finding that applicable State law (MO) does not apply this rule: "to extend coverage over otherwise uncovered claims."

December 12, 2011