A court affirmed the denial of W.R. Grace & Co.’s asbestos insurance claims against the liquidation estate of Grace’s insolvent excess-of-loss insurer, on the ground that Grace failed to submit timely “absolute” claims under New Jersey’s version of the Uniform Insurers Liquidation Act. Grace, which has been undergoing bankruptcy restructuring, had established a plan with a creditor’s committee to create a trust to pay asbestos claims. The plan, however, was not approved by the bankruptcy court prior to the deadline to submit excess of loss claims to the liquidation estate of Grace’s excess insurer. When Grace submitted a proof of claim to the estate, the liquidator denied the claim, relying on provisions of the Uniform Insurers Liquidation Act that permit payment of only “absolute” claims, as opposed to “contingent” claims.
Grace ultimately appealed to the state court, which affirmed. The court agreed the claims were “contingent” as “the value of the claims at issue had not been fixed by actual payment, settlement, final judgment or a claims resolution procedure approved by the federal bankruptcy court,” notwithstanding estimates provided by Grace’s expert witness. Because the estimates did not “stand on their own,” the claims could not be considered “absolute” under state precedent. The court also rejected Grace’s argument that even if the claims were contingent, they should be paid to prevent a “windfall.” The court distinguished state law, and held that, under the McCarran-Ferguson Act, federal bankruptcy law “plays no part” where the state Uniform Insurers Liquidation Act provided “a comprehensive mechanism” for the liquidation and payment of claims. Commissioner of Insurance of the State of New Jersey v. Integrity Insurance Co./W.R. Grace & Co., Case No. A-2505-10T4 (N.J. Super. Ct. App. Div. Jan. 11, 2012).
This post written by Michael Wolgin.
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