In re Firearms Import and Export Corp., Bankruptcy No. 90-18256-BKC-SMW
| Decision Date | 23 September 1991 |
| Docket Number | Adv. No. 91-0308-BKC-SMW-A.,Bankruptcy No. 90-18256-BKC-SMW |
| Citation | 131 BR 1009 |
| Parties | In re FIREARMS IMPORT AND EXPORT CORP., a/k/a FIE Corp., Debtor. FIREARMS IMPORT AND EXPORT CORP., a/k/a FIE Corp., Debtor and Debtor-in-Possession, Plaintiff/Counterdefendant, v. UNITED CAPITOL INSURANCE COMPANY, Defendant/Counterplaintiff, v. Allan BERNKRANT, et al., Third-Party Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
David M. Levine, Mara Beth Sommers, Mark Bonacquisti, McDermott, Will & Emery, Miami, Fla., for debtor.
Robert C. Meyer, Robert C. Meyer, P.A. Coral Gables, Fla., William G. Edwards, Nicklaus, Valle, Craig & Wicks, Miami, Fla., for United Capitol.
Herbert Stettin, Miami, Fla.
David Profilet, Miami, Fla.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
THIS CAUSE came before the Court on August 6, 1991 for trial on the objection of Firearms Import and Export Corporation, debtor and debtor-in-possession ("FIE") to the proof of claim filed by United Capitol Insurance Company ("United Capitol"); FIE's counterclaim to the proof of claim filed by United Capitol; and United Capitol's counter-counterclaim to the action by FIE. Having heard the testimony of witnesses and the arguments of counsel for the respective parties, and having considered the demeanor of the witnesses, the exhibits presented and the remainder of the record in this cause, the Court finds as follows:
FINDINGS OF FACT
1. At all relevant times, FIE was a Florida corporation lawfully engaged in the manufacture, import, export, and wholesale distribution of firearms. FIE has maintained its principal place of business in Opa-Locka, Florida.
2. On November 8, 1990 (the "petition date"), FIE filed a voluntary petition with the bankruptcy court for relief under Chapter 11 of Title 11 of the United States Code.
3. Since the petition date, FIE has continued in possession of its property as a debtor in possession under 11 U.S.C. § 1108.
4. United Capitol is a corporation organized under the laws of Wisconsin, with its principal place of business in Atlanta, Georgia.
5. At all relevant times, United Capitol has transacted business in the state of Florida as a surplus line carrier pursuant to § 626.913 et seq., Florida Statutes.
6. As a result of FIE's business activities, and the potential liabilities necessarily attendant to such business activities, including specifically (but not limited to) the possibility of various lawsuits asserting "product liability" causes of action, FIE acquired general commercial liability insurance in order to go forward with its business. Such insurance serves to protect not only FIE itself, but also affords the indirect customers of FIE (i.e. retail purchasers) a dedicated source of recovery should they suffer a compensable harm as a result of using a product manufactured, sold or distributed by FIE.
7. In furtherance of this end, and in conjunction with various corporate affiliates of FIE and other entities with whom FIE regularly transacted business, FIE was named as an insured under three commercial general liability occurrence policies (the "Policies") — policies no. GLA 100 0101 (1987 policy); GLA 100 0312 (1988 policy); and GLA 100 0454 (1989 policy). The Policies were issued by United Capitol on or about April 23, 1987, 1988 and 1989 respectively, and provide coverage for claims which arise from occurrences from May 10, 1986 to February 16, 1990. Thus, these Policies, by their own terms, provide coverage for periods which are entirely pre-petition.
8. The Policies (among other things) cover FIE's liability for bodily injury and property damage claims which might be asserted by product liability claimants. Such claims are denominated as "products-completed operations hazard" claims in the Policies.
9. In each coverage year, United Capitol provides one million dollars ($1,000,000.00) products-completed operations hazard coverage for claims in the aggregate, which is excess over the $350,000.00 aggregate self-insured retention (SIR) to be funded by the insureds — $100,000.00 of SIR per claim in policy 100 0101, and $50,000.00 of SIR per claim in policies 100 0132 and 100 0454.
10. All of the Policies contain the following provisions:
11. Each of the Policies, by its express terms, expired prior to the filing of the bankruptcy petition. Because the Policies are occurrence-based, however, United remains liable for claims arising from a coverage period (subject to any statute of limitations), even if such claim is asserted after the expiration of the respective policy term.
12. Prior to the filing of FIE's Chapter 11 Petition, United Capitol was paid $497,500.00, $451,950.00 and $451,950.00 in advanced premiums for the 1987, 1988 and 1989 policies.
13. As of the petition date, approximately twenty product liability claims covered by the Policies had been asserted against FIE or its affiliated co-insureds. Since the petition date several more have been asserted.
14. United Capitol received timely notice of the March 20, 1991 claim bar date in FIE's Chapter 11 case.
15. United Capitol filed a Proof of Claim dated March 15, 1991 which denominated the debtor as "F.I.E.", but included the wrong case number. This Proof of Claim was received by the clerk of this Court on March 19, 1991, but was not docketed in the main bankruptcy case until the day of trial (August 6, 1991).
16. United Capitol filed an Amended Proof of Claim, with the proper case number, dated April 15, 1991.
17. FIE filed its Objection of Debtor-In-Possession to Allowance of Claim of United Capitol Insurance Company and Counterclaim for Equitable Subordination and Declaratory Relief on April 22, 1991, which initiated this adversary proceeding. On June 28, 1991 United Capitol filed its Answer to Complaint and Affirmative Defenses, which also asserted various third-party claims and counter-counterclaims.
18. Prior to trial, FIE voluntarily dismissed its Count III for equitable subordination. United Capitol also voluntarily dismissed its Count III, a third-party claim also for equitable subordination (against an insider of FIE), in order to refile it as a separate action.
This Court has jurisdiction over the claims at issue in the proceeding pursuant to 28 U.S.C. §§ 151, 157, 1334, 2201 and 2202; § 101 et seq. of the Bankruptcy Code; and the order of the United States District Court for the Southern District of Florida referring all cases and proceeding under the Bankruptcy Code in this district to this Court. This is a core proceeding under 28 U.S.C. § 157(b), including, but not limited to, § 157(b)(2)(A), (B), and (C). In their pre-trial stipulation, the parties stipulated to the core status of this proceeding. Venue is appropriate in this district pursuant to 28 U.S.C. § 1409.
United Capitol argues that the Policies must be deemed executory contracts and thus subject to the assumption and rejection provisions of § 365 of the Bankruptcy Code. FIE, on the other hand, cites several precedents which it contends demonstrate that the Policies are not executory in nature. Considering both arguments in their totality, this Court concludes that the Policies are not executory contracts and therefore § 365 is inapplicable.
United Capitol relies heavily on In re Government Securities Corp., 101 B.R. 343 (Bankr.S.D.Fla.1989) (Cristol, J.) for the following proposition:
Insurance contracts are generally considered executory contracts. Significantly, however, the sole basis for the holding that a contract for insurance is an executory contract has been the fact that the bankrupt insured had a continuing obligation to make premium payments under the contract.
Id. at 348 (citations omitted) (first emphasis retained; second emphasis added).
United Capitol's reliance on this proposition is doubly misplaced under the facts of this case. First, and most significantly, the precedents cited by FIE conclusively demonstrate that whatever the general rule may be, when dealing with insurance policies and operative facts similar to those at issue here, the courts have held such policies to be non-executory. Second, the "sole basis for the holding that a contract for insurance is an executory contract" — a continuing obligation of the debtor to make premium payments — does not exist in this case.
In a case with facts remarkably similar to this one, Matter of Federal Press Co., Inc., 104 B.R. 56 (Bankr.N.D.Ind.1989), the bankruptcy court held that the insurance...
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