Yessenow v. Executive Risk Indemnity, 953 N.E.2d 433

Plaintiffs Jeffrey Yessenow and Vijay Patel are former directors of iHealthcare, Inc. and Illiana Surgery and Medical Center, LLC.
Heartland Memorial Hospital, LLC (Heartland) is the reorganized entity formerly known as Illiana; iHealthcare owned Heartland.
Executive Risk Indemnity, Inc. issued a directors and officers policy covering 2005–2006 with a runoff period to 2007.
Heartland was involuntarily bankrupt in January 2007; iHealthcare filed Chapter 11 in February 2007; cases were consolidated in 2007.
A bankruptcy trustee (Abrams) filed five suits in the Heartland bankruptcy; plaintiffs sought coverage under the D&O policy; Executive denied coverage.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Bankruptcy exclusion enforceable under 541(c)?	541(c) protects the policy as estate property; exclusion renders policy useless.	Exclusion valid; applies to claims by the estate or its officials.	Bankruptcy exclusion unenforceable under 541(c).
Insured vs. insured exclusion bars coverage?	Trustee is not the debtor and not an insured; ambiguity favors insured.	Exclusion clearly bars claims by the estate/insured against insured.	Insured vs. insured exclusion does not bar coverage; Abrams not an insured; policy remains coverage.

Lexington Insurance Co. v. American Healthcare Providers, 621 N.E.2d 332 (Ind. Ct. App. 1993) (insolvency exclusion interpreted to exclude related claims)
Coregis Insurance Co. v. American Health Foundation, Inc., 241 F.3d 123 (2d Cir. 2001) (insolvency/financial impairment exclusions exclude related suits)
Biltmore Associates, LLC v. Twin City Fire Insurance Co., 572 F.3d 663 (9th Cir. 2009) (insured versus insured exclusion applied to trustee scenarios)
McRaith v. BDO Seidman, LLP, 391 Ill. App. 3d 565 (2009) (liquidator/trustee distinctions; imputation of conduct not to debtor/insurer)
Holland v. Arthur Andersen & Co., 127 Ill. App. 3d 854 (1984) (imputation doctrine not apply to trustees in bankruptcy context)