In re Lavigne, 95 Civ. 6953 (KTD)
| Citation | 199 BR 88 |
| Decision Date | 25 July 1996 |
| Docket Number | No. 95 Civ. 6953 (KTD),92 B 45593 (BRL). Adv. No. 94-8905A.,95 Civ. 6953 (KTD) |
| Parties | In re Jeffrey LAVIGNE, d/b/a Laser Medical Associates of NY, Debtor. MEDICAL MALPRACTICE INSURANCE ASSOCIATION, Plaintiff-Appellant, v. Hal M. HIRSCH, as Trustee of Estate of Jeffrey E. Lavigne, d/b/a Laser Medical Associates of NY, Defendant-Appellee. |
| Court | U.S. District Court — Southern District of New York |
Werner & Kennedy, New York City (Richard J. Cairns and Haroula K. Ballas, of counsel), for Appellant.
Gainsburg & Hirsch, Purchase, NY (Hal M. Hirsch, David L. Barrack and Scott Goldberg, of counsel), for Trustee Hal M. Hirsch.
Appellant, Medical Malpractice Insurance Association, ("MMIA") appeals from an order of Bankruptcy Judge Burton R. Lifland, issued June 14, 1995, which granted the cross-motion for summary judgment of Hal M. Hirsch, as Trustee of the Estate of Jeffrey E. Lavigne, d/b/a Laser Medical Associates of NY ("Trustee"). MMIA argues that the Bankruptcy Judge misapplied relevant provisions of the Bankruptcy Code in holding that the Trustee in a Chapter 7 conversion had the contractual and statutory right to exercise an option to purchase Tail Coverage for a claims-made, medical malpractice insurance policy initially purchased by the Debtor and renewed by him to cover the period April 1, 1993 through March 31, 1994. Such Tail Coverage allows the insured to seek coverage for claims which arise during the policy period, but which are first asserted after the policy period.
The grant of a motion for summary judgment by the Bankruptcy Court is subject to de novo review by the District Court. See Trans-Orient Marine Corp. v. Star Trading & Marine, Inc., 925 F.2d 566 (2d Cir.1991); In re Atlantic Computer Sys., 154 B.R. 166 (Bankr.S.D.N.Y.1993). After considering the undisputed facts in this case, and the arguments presented on appeal, Bankruptcy Judge Lifland's decision is affirmed in all respects.
MMIA argues that the option to purchase such Tail Coverage expired both contractually and statutorily before the Trustee attempted to exercise the option on behalf of the estate. MMIA calculates the termination date as either September 28, 1993, the date upon which MMIA canceled the policy based on the Debtor's expressed intent to cancel the policy, or January 27, 1994, the date upon which the case was converted from Chapter 11 to Chapter 7. According to MMIA, under either scenario, the Trustee would have sixty days from these dates of termination to assume the policy and purchase the Tail Coverage. The latest date for the Trustee to exercise the option, therefore, would be March 28, 1994. MMIA argues that the Trustee's attempt to exercise the option to purchase Tail Coverage by letter to MMIA on May 3, 1994, was untimely and therefore MMIA refuses to accede to the Trustee's exercise of the option.
The Trustee asserts that Lavigne's cancellation of the policy was void since it constituted an extraordinary transaction by the Debtor involving the property of the estate, and therefore, required Bankruptcy Court approval. The Trustee argues that since this transaction was null and void, the insurance policy could not have been terminated on September 28, 1993, but continued through the date of conversion of the estate. Presented with the undisputed facts that immediately after the attempted cancellation, Lavigne closed the last of his medical offices and attempted suicide, Bankruptcy Judge Lifland concluded that the cancellation was "part of an illogical and desperate course of action" by the Debtor. In re Jeffrey E. Lavigne, 183 B.R. 65, 70 (Bankr.S.D.N.Y. 1995). Based on these surrounding facts, Bankruptcy Judge Lifland held that the cancellation was an extraordinary transaction by the Debtor which required Bankruptcy Court approval. The cancellation of the insurance contract on September 28, 1993, therefore, was null and void and the insurance contract remained in force as of the date of the conversion to Chapter 7, on January 27, 1994.
I agree that the Debtor's attempt to cancel the insurance policy constituted an extraordinary transaction involving the property of the estate which would require court approval. Prior to the cancellation of the coverage of this policy, the Debtor had numerous malpractice claims pending against him, a number of which would appear to fall within the coverage of this Policy. Bankruptcy Judge Lifland also noted in his opinion that Lavigne's attorney at the time of his cancellation and attempted suicide, Michael Sucher, took over operation of Lavigne's business affairs without leave of court. In re Lavigne, 183 B.R. at 67. Given these undisputed facts, the attempted cancellation is properly considered activity outside the Debtor's ordinary course of business, and the Debtor should have sought Bankruptcy court approval of his attempted cancellation. See In re Waterfront Cos., 56 B.R. 31, 35 (Bankr. D.Minn.1985) ().
The parties agree that after conversion of the estate, the Trustee did not assume or reject the policy within the statutorily required period, or seek an extension of time to do so. According to Section 365(d)(1) of the Bankruptcy Code, unless the Policy is assumed upon conversion, it is automatically rejected sixty days after the conversion of the Debtor's bankruptcy case. Bankruptcy Judge Lifland applied this section to conclude that since no assumption was made, the Policy was rejected as a matter of law on March 28, 1994. Bankruptcy Judge Lifland then applied the sixty day option to purchase Tail Coverage under the Policy from that date, giving the Trustee until May 27, 1994 to exercise the option. The Trustee's May 3, 1994 letter attempting to exercise the option would therefore fall within the option period.
MMIA's main argument on the summary judgment motion before Bankruptcy Judge Lifland was that the statutorily deemed rejection of the policy on March 28, 1994, constituted a breach of the...
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