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Chapter 11 bankruptcy as a means for resolving mass tort claims

In recent years, a growing number of defendants have sought to use reorganization under chapter 11 of the United States Bankruptcy Code to obtain permanent and complete relief from mass tort claims. Many of these entities were defendants in asbestos bodily injury litigation, and were eligible for the special protections for such claims provided in Bankruptcy Code section 524(g). Yet defendants facing other types of claims – including those alleging bodily injury from silica, talc, silicone breast implants, opioid painkillers, and allegedly defective ear protection – also have pursued relief in bankruptcy cases. Several Roman Catholic dioceses, as well as the Boy Scouts of America, have used chapter 11 to seek permanent solutions to sex abuse claims. 

The general outline of the chapter 11 strategy for all of these defendants is similar. A debtor entity obtains immediate relief from tort system litigation (and its attendant costs) by filing bankruptcy, due to the automatic stay of all litigation under Bankruptcy Code section 362. It then prepares a chapter 11 plan that establishes a settlement trust to resolve the mass tort claims against it. The debtor will ask a Bankruptcy Court to issue an injunction that will force mass tort claimants to forego tort litigation against the debtor, in favor of submitting to the settlement trust for resolution.  The debtor’s aim is to emerge from the chapter 11 proceeding shorn of its mass tort obligations, with the settlement trust serving as the exclusive source of resolution for those claims on a permanent basis.Continue Reading Liability insurance in mass tort bankruptcy cases – A brief primer

One year ago today, the Pennsylvania Supreme Court issued the first two of four important insurance-coverage law opinions that it would hand down in 2014 and 2015. Those four decisions – which address a number of topics including insurer bad faith, trigger of coverage, policy exclusions, and settlements and reservations of rights – significantly impacted the legal landscape in the commonwealth.

While much has already been written about the specific holding in each of those cases, policyholders can still learn more from each of the decisions. Now – 365 days later – is a good time to reflect on those lessons:Continue Reading 365 Days Later: Lessons Learned from the Pennsylvania Supreme Court