Article
Court Rules James Brothers, Other First Brands Executives Can Tap $100M of Coverage Under D&O Policies For Now
In a bench ruling, Judge Christopher Lopez announced he will allow First Brands directors and officers to tap one tower of D&O insurance policies to fund litigation defense costs. The judge found that the so-called AIG policy, which provides $100 million of coverage, is not estate property because it insures only directors and officers and not the debtors. The automatic stay does not apply and the executives can access defense funding under the AIG policy without bankruptcy court authorization, Judge Lopez said.
Company founder Patrick James, his brother Edward James and former CFO Stephen Graham – joined by many current and former First Brands directors and officers – moved for authorization to access two towers of insurance: the AIG policy and the “ABC policy,” which provides another $100 million of coverage.
Judge Lopez ruled that the ABC policy is estate property because the debtors are co-insureds and have an interest in the proceeds. He denied the executives’ request to lift the automatic stay so that they can tap this policy for defense costs, saying they submitted no evidence that they would be harmed without stay relief.
The judge didn’t rule out the possibility of allowing the Ds and Os to access the ABC policy in the future. “It’s not no, it’s not never. It’s just you haven’t established cause today,” he told the movants. Judge Lopez said that if the executives deplete the $100 million under the AIG policy and come back to the court to request access to the ABC policy, “I do think that’s a short hearing” because they would likely be able to show “they have to use the money.”
Today’s hearing has now concluded.
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