David Christian Published in Law360
"Ensuring Insurer Standing In Insured Ch.11 Cases"

Seyfarth Shaw Chicago office partner David Christian wrote an article published in Bankruptcy, Product Liability, Insurance and Appellate Law360 on July 5. The article discussed two circuit-level decisions by the United States Court of Appeals which held that liability insurers have standing as parties in interest to appear and be heard in an insured's Chapter 11 case where the insurer may be liable to reimburse the claims of the insured's creditors.

In re Global Industrial Technologies Inc. (GIT), the court held that "anyone who has a legally protected interest that could be affected by a bankruptcy proceeding" constituted a party interest.

In re Heating Oil Partner LP, the court held that a liability insurer had standing to bring a motion in bankruptcy court, and the insurer's "personal stake" made it a party in interest pursuant to Section 1109(b).

David states that "Taken together, these two circuit-level decisions create a dramatic trend away from the approach adopted by many lower courts to insurer standing in Chapter 11 cases." Insurers now have "new ammunition in pursuing their stake in an insured's bankruptcy, not just in important jurisdictions bound by these rulings."

He also points out that debtors and their creditors who wish to pay claims with insurance proceeds will have to think twice about this approach and inclusion of insurers when bargaining.