SCOTUS Sides with Insurer in Asbestos-related Chapter 11 Case

A recent unanimous ruling from the U.S. Supreme Court upended the status quo for insurers with financial responsibility in bankruptcy proceedings and established precedent that those insurers have the right to have their voice heard by the courts presiding over such proceedings.

On Thursday, Justice Sonya Sotomayor delivered the 8-0 opinion of the court that held Truck Insurance Exchange should have been allowed to voice its concerns about the terms of a proposed $50 million settlement of thousands of asbestos-related lawsuits because the insurer is a “party in interest” in the dispute. In the 18-page opinion, Justice Sotomayor took aim at the doctrine that had governed such disputes, the insurance neutrality doctrine, where courts have determined insurers are not parties in interest to Chapter 11 proceedings so long as the reorganization plan doesn’t “increase the insurer’s pre-petition obligations or impair the insurer’s pre-petition policy rights.”