Justices’ Ch. 11 Ruling Is A Big Moment For Debtors’ Insurers

In one of the most publicized terms for the U.S. Supreme Court, one June decision has not received the attention it deserves: Truck Insurance Exchange v. Kaiser Gypsum Company Inc.

Truck upends decades of Chapter 11 bankruptcy jurisprudence that often relegated a debtor’s insurer to the sidelines, even if the insurer had financial responsibility under the proposed reorganization plan.

As long as the reorganization plan was insurance-neutral, the debtor’s insurer was not considered a party in interest under Chapter 11 and lacked a right to be heard. Truck reverses that rule, broadly holding that a debtor’s insurer with financial responsibility for bankruptcy claims is a party in interest with the right to object to the reorganization plan.

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