467 B.R. 390
Bankr. W.D. La.2012Background
- Trustee seeks damages from ten former board members for alleged fiduciary breaches, oversight failures, and record-keeping deficiencies.
- Admiral Insurance Co. is sued under Louisiana Direct Action Statute for coverage under the Admiral D&O Policy.
- Admiral moves for summary judgment arguing Exclusion F (insured vs. insured) bars coverage for Trustee's claims.
- Court evaluates whether the Trustee, as Chapter 7 trustee, is the ‘Insured Entity’ to which Exclusion F could apply.
- Court also considers derivative action exception and the broader policy interpretation in bankruptcy context.
- Monitor Insurance Co. was dismissed; judgment addresses only Admiral's coverage liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Exclusion F bars coverage for Trustee's claims. | Willson argues Trustee not the Insured Entity; exclusion not triggered. | Admiral contends Trustee's claims fall under insured versus insured exclusion. | Exclusion F does not bar coverage for Trustee's claims. |
| Whether the Trustee is the Insured Entity for purposes of Exclusion F. | Estate is separate from insured debtor; Trustee not the Insured Entity. | Trustee should be treated as the insured entity under exclusion. | Trustee is not the Insured Entity; exclusion does not apply. |
| Whether claims are derivative under the policy’s derivative action exception. | Trustee's claims could be derivative on behalf of the Debtor. | Policy derivative action exception may apply. | Even if applicable, derivative exception would not defeat coverage as claims are direct. |
| Whether the policy's ‘in the right of the Insured Entity’ language extends to trustees. | Trustee asserts claims in the right of the Debtor. | Exclusion could extend to rights of the Insured Entity. | Language does not sweep in the bankruptcy trustee; exclusion does not apply. |
Key Cases Cited
- Tor ch Liquidating Trust v. Stockstill, 561 F.3d 377 (5th Cir. 2009) (breach claims by liquidating trustee are direct, not derivative)
- Mt. Hawley Ins. Co. v. Federal Savings & Loan Ins. Corp., 695 F.Supp. 469 (C.D. Cal. 1987) (FSLIC actions not within insured vs. insured exclusion when in corporate capacity)
- FDIC v. National Union Fire Ins. Co., 630 F.Supp. 1149 (W.D. La. 1986) (FDIC not simply in the shoes of predecessor bank; context matters)
- Cox Communications, Inc., 708 F.Supp.2d 1322 (N.D. Ga. 2010) (trustee/estate claims vs. officers considered in bankruptcy context)