# Amicus Curiae Brief — Hartford Underwriters Ins. Co. v. Union Planters Bank, NA

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0336%3A04

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2000
- **Citation:** 530 U.S. 1

## Text

—
! Supreme Us,
sUpionic

he | FILED

oct 8
No. 99-409 |

IN THE

Supreme Court of the United States

HARTFORD UNDERWRITERS INSURANCE COMPANY,
Petitioner,
Vv.

MAGNA BANK, N.A.,
Respondent.

On Petition for Writ of Certiorari to the
United States Court of Appeals
for the Eighth Circuit

BRIEF OF AMICUS CURIAE
AMERICAN INSURANCE ASSOCIATION
IN SUPPORT OF THE PETITION

CRAIG A. BERRINGTON MARK F. HORNING

PHILLIP L. SCHWARTZ Counsel of Record

AMERICAN INSURANCE SIDNEY P. LEVINSON
ASSOCIATION STEPTOE & JOHNSON LLP

1130 Connecticut Ave., N.W. 1330 Connecticut Ave., N.W.

Washington, D.C. 20036 Washington, D.C. 20036

(202) 828-7100 (202) 429-3000

Counsel for Amicus Curiae
American Insurance

Association
ec a TE A A AS -eEeS,
WILSON-EPES PRINTING Co.. INC. - (202) 789-0096 - WASHINGTON, D.C. 20001

1999
IMs OLERM

Ee ———————

In many jurisdictions, the State Labor Department can
shut down a company that fails to secure workers’ com-
pensation insurance coverage. In some states, an un-
insured employer can be sued in tort by injured employees,
who can recover substantially more than the statutorily-
prescribed workers’ compensation benefits. These tort
claims, if they occur after the bankruptcy filing, are treated
as an administrative expense that could seriously diminish
the debtor’s assets. See Reading Co. v. Brown, 391 U.S.
471, 485 (1968).

An employer that becomes insolvent and enters chapter
11 does not have the statutorily-required financial resources
to qualify for self-insurance. Insurance must therefore be
purchased from a licensed carrier. Insurers, however, will
be unwilling to provide coverage if they do not have an
effective means for obtaining payment of premiums. Out-
side of bankruptcy, the insurer may cancel a policy during
the policy period for nonpayment. But this option is not
available in bankruptcy, because the Code generally for-
bids termination of contracts with the debtor absent relief
from the automatic stay. See 11 U.S.C. § 362 (1994).
Thus, once an insurer agrees to underwrite insurance for
a bankrupt employer, it may be “locked in” and required
to pay benefits to insured employees even if the employer
defaults in payment of premiums. The trustee, in turn,
has little incentive to deplete the assets of the estate to
pay premiums because coverage is assured irrespective of

5 See, e.g., Ariz. Rev. Stat. § 23-961; Cal. Lab. Code § 3700;
Conn. Gen. Stat. § 31-284; Fla. Stat. Ann. § 440.38; 820 Ill. Comp.
Stat. § 305/4; Ky. Rev. Stat. Ann. § 342.340; Md. Code Ann., Lab.
& Empl. § 9-402; Mass. Gen. Laws (Ann.) ch. 152, § 25A; Minn.
Stat. § 176.181; Mo. Rev. Stat. § 287, 280; N.Y. Work. Comp. Law
§ 50; Va. Code Ann. § 65.2-801.

17

payment. As a result, absent direct recourse to the bank-
ruptcy court, insurers may decline to underwrite coverage
out of concern they will never be paid.

Conversely, the ruling below cannot be justified as
necessary to support the Code’s policy of protecting credi-
tor collateral. If the administrative claimant is permitted
to present its claim directly to the bankruptcy court, it
can recover only if it demonstrates that the expense was
reasonably necessary for the preservation of the debfor’s
collateral and was of direct benefit to the secured lender.
See 11 U.S.C. § 506(c) (1994).

Nor can the decision below be justified as needed to
prevent preferential treatment of one unsecured claimant
at the expense of others, as circuits adopting the minority
rule have held. See Hen House, 177 F.3d at 723: Ford
Motor Credit Co. v. Reynolds & Reynolds Co. (In re JKJ
Chevrolet, Inc.), 26 F.3d 481, 484 (4th Cir. 1994). As
the dissent in Hen House correctly points out, the whole
purpose of § 506(c) is to create a priority for certain
adm /nistrative expense claimants over other creditors. 177
F.3d at 727.

The decision below should thus be reviewed because it
is inconsistent with the general policy of chapter 11 favor-
ing reorganization and the specific tool for implementing
that policy Congress fashioned in section 506(c).

18

CONCLUSION

For the reasons stated herein, this Court should grant
the petition for review of the Eighth Circuit’s decision.

Respectfully submitted,

CRAIG A. BERRINGTON MARK «+ HORNING
PHILLIP L. SCHWARTZ Counsel of Record
AMERICAN INSURANCE SIDNEY P. LEVINSON

ASSOCIATION STEPTOE & JOHNSON LLP
1130 Connecticut Ave, N.W. 1330 Connecticut Ave., N.W.
Washington, D.C. 20036 Washington, D.C. 20036
(202) 828-7100 (202) 429-3000

Counsel for Amicus Curiae
American Insurance
Association

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0336%3A04. Public record. Not legal advice.