Cases & Deals

Kaiser Gypsum and Hanson Permanente's Plan of Reorganization affirmed by Fourth Circuit, holding insurer lacks standing to challenge insurance-neutral plan

Clients Hanson Permanente Cement, Inc. and Kaiser Gypsum Company

The Fourth Circuit in a published decision affirmed an order confirming the joint plan of reorganization of Kaiser Gypsum and Hanson Permanente, agreeing with Jones Day and the lower courts that the Debtors' primary insurer lacked standing to challenge the merits of the Plan. The Plan resolves substantial environmental and asbestos-related liabilities of the Debtors, who are subsidiaries of one of the world’s largest building-materials manufacturers (Heidelberg Materials). It channels all current and future asbestos claims not covered by insurance to a trust under 11 U.S.C. § 524(g), while leaving claims covered by insurance to be resolved in the tort system to collect available insurance. The district court, adopting the recommendations of the bankruptcy court, confirmed the Plan. The Debtors' primary insurer appealed, arguing that the Plan altered its rights by precluding it from contending in future cases that the Debtors' conduct in bankruptcy violated their duties under the insurance policies. The Fourth Circuit rejected this argument, holding that the Debtors' duties apply only to individual claims. The insurer also argued that the Plan enabled fraud because it did not impose on future tort suits the insurer's desired fraud-prevention measures. The Fourth Circuit rejected this argument as well, because the insurer “was not entitled to those measures before the bankruptcy proceeding. To the contrary, the [insurance] policies specifically obligate [insurer] to '[i]nvestigate and defend any claim or suit against the [Debtors] . . . even if such claim or suit is groundless, false, or fraudulent.'" Because the Plan was thus “insurance neutral,” the insurer lacked statutory standing under the Bankruptcy Code to challenge the Plan’s merits. The Fourth Circuit also rejected, for lack of constitutional standing, the insurer's argument that it could challenge the asbestos-related parts of the Plan based on its claim for unpaid deductibles under its policies, given that the Plan paid that claim in full.

Truck Insurance Exchange v. Kaiser Gypsum Co. Inc., No. 21-1858, (4th Cir.)