In re Global Indus. Tech., Inc., No. 08-3650 (3d Cir. 2011)Annotate this Case
The district court denied insurance companies standing to challenge a Chapter 11 plan of reorganization for a debtor facing asbestos and silica-related injury claims and affirmed the plan. The Third Circuit vacated and remanded, holding that the companies have bankruptcy standing. The availability of hundreds of millions of dollars in insurance cover was a major assumption underlying the plan; insurance policies were assigned to specific trusts created for the injury claims, in contravention of anti-assignment clauses in the policies. The plan puts a "hand in the pocket" of the insurance companies, which, therefore, qualify as parties in interest under 11 U.S.C. 1109(b). Although the plan preserves coverage defenses, it increases the companies' pre-petition liability exposure more than 27 times over. Noting the likely increase in costs of administration and investigation, the court held that the interests are not speculative. The court stated that an allegation that the debtor "sold out" the insurers to gain approval of the plan by plaintiffs' attorneys was "not without record support."