Amatex Corp. v. Stonewall Ins. Co., Civ. A. No. 89-2840 to 89-2843.
| Citation | 102 BR 411 |
| Decision Date | 21 July 1989 |
| Docket Number | Civ. A. No. 89-2840 to 89-2843. |
| Parties | AMATEX CORPORATION, v. STONEWALL INSURANCE COMPANY. AMATEX CORPORATION, v. INTERSTATE FIRE & CASUALTY CO. AMATEX CORPORATION, v. BELLEFONTE INSURANCE COMPANY. AMATEX CORPORATION, v. The AETNA CASUALTY AND SURETY COMPANY. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
William Bradbury, Wright, Manning, Kinkead & Olive, Norristown, Pa., Joseph Simmons, Deputy in Charge of Bankruptcy Operations, Philadelphia, Pa., for plaintiff.
Robert Corbin, Philadelphia, Pa., for defendants.
The present case comes as an appeal from a final order of the bankruptcy court. This court has jurisdiction to hear such appeals pursuant to 28 U.S.C. § 158(a) and Bankruptcy Rule 8001(a). Debtor Amatex Corporation was insured for products liability by Aetna Casualty and Surety Co. (Aetna), Bellefonte Insurance Company (Bellefonte), Stonewall Insurance Company (Stonewall), and Interstate Fire & Casualty Company (Interstate). Debtor filed complaints against all four insurers on May 12, 1988, requesting the bankruptcy court to compel the insurers to order the insurance carriers to pay the remaining limits of their comprehensive general liability policies into two trusts proposed by the debtor in its Plan of reorganization for the benefit of claimants who have become known as the "Asbestos Litigants". The bankruptcy court granted the four insurance carriers' motions for summary judgment and debtor appealed all four judgments. The four cases were consolidated for the purpose of this appeal.
The debtor raises only one issue on appeal. It claims that the bankruptcy court erred in entering judgment for the defendant insurance carriers, thereby declining to exercise it broad equitable powers to order the insurance carriers to pay the remaining proceeds of their policies into the debtor's proposed trust for the benefit of various claimants allegedly suffering from asbestos related personal injuries or property damage.
In making its decision, the bankruptcy court took into account the fact that the debtor had conceded that: (1) the insurance contracts between the parties did not require the insurers to make lump-sum payments up to their policy limits prior to the time that the debtor becomes legally liable for those funds; (2) Pennsylvania law requires insurers to reimburse the insured party only in accordance with the terms of the contract; (3) there are no ambiguities in the insurance contracts which would result in an interpretation of them requiring lump-sum payments. Based on these facts, which are not now contested by the debtor, the bankruptcy court concluded that:
The use of our equitable power which is urged by the Debtor in these proceedings would fly directly in the face of very basic tenants of Pennsylvania insurance law, i.e., it would require us to order insurers to remit payments to an insured party which are admittedly not otherwise due under unambiguous terms of the policies.... This court is not authorized, pursuant to 11 U.S.C. § 105(a), or any other authority, to disregard established state law principles in providing relief to the Debtor.
Under 11 U.S.C. § 105(a), the bankruptcy court has the power to "issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title." It also may take any action or make any determination "necessary or appropriate to enforce or implement court orders or rules, or to prevent abuse of process." 11 U.S.C. § 105(a). Based upon this rule, the debtor argues that the requested modification of the insurance contracts' terms is within the bankruptcy court's power.
The debtor argues that 11 U.S.C. § 541 and § 542, which define the scope of a debtor's estate and give the bankruptcy court the power to order that the property of the debtor be turned over the estate, together with § 105(a), gives the bankruptcy court the power to order the insurers in this case to make the requested lump-sum payments. Section 541 includes within a debtor's estate "all legal and equitable interest of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1).
The bankruptcy court noted in its opinion that, on the occasions when it has used its powers under § 105(a), it has done so with extreme caution. The Supreme Court has held that such powers "must and can only be exercised within the confines of the Bankruptcy Code" and that the substance and remedies provided under state law must be the guiding force of bankruptcy court decisions, rather than the "demands of equity." Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 108 S.Ct. 963, 968-69, 99 L.Ed.2d 169 (1988); Butner v. United States, 440 U.S. 48, 55-56, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979). See also Southern Ry. v. Johnson Bronze Co., 758 F.2d 137, 141 (3d Cir.1985) ()
The debtor cites several cases which it contends stand for the proposition that insurance contracts are property within the meaning of the bankruptcy statutes. Debtor cites the cases of In re Johns-Manville Corp., 40 B.R. 219, 230 (S.D.N.Y.1984), MacArthur Co. v. Johns-Manville Corp., 837 F.2d 89 (2d Cir.1988), and A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 1001 (4th Cir.1986), in support of its request. However, as the bankruptcy court correctly noted, MacArthur and In re Johns-Manville involved insurers who voluntarily agreed to contribute lump-sum payments to the trust and involved only the bankruptcy court's power to approve the settlement, to enjoin suits against the insurers, and to allow the claimants to assert their claims against the proceeds of the debtor's settlement. The rationale of these cases therefore do not apply to the present case.
In Piccinin, the fourth circuit held that the bankruptcy court had the power to enjoin suits against the insurers of the debtor on the grounds...
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