Insurance and Bankruptcy Issues

People are looking more to make sure other people have insurance when they are doing business with them or involved in disputes.  The financial downturn pressures companies and individuals to maximize insurance contributions to resolve lawsuits. When people are in bankruptcy or insolvency, they do not have money to contribute even when other people get judgments against them.

Insurance drives settlements even when a defendant owns a house or has other assets. People get greedy when they find out insurance limits, demanding hundreds of thousands of dollars when they are not even injured and off climbing the Great Wall in China.  Some people who file lawsuits do not intend to go all the way, but just want to settle within the policy's limits because it is easy money for the insurance company to just fork over versus waiting for a defendant to pay by selling assets or through wage garnishments.

When people take out insurance, they should find out for sure what the premiums are paying for.  They do not want to get into legal trouble and find out they have to pay out of their own pocket even after all the premiums.  Insurance companies are greedy too in that they do not always want to help out the insured, and may dispute coverage.  Everyone is in it for the money even the defense attorney assigned to help the insured.

Companies and individuals tight on cash and faced with coverage objections are less able to enter settlement discussions and resolving the dispute with the carrier later. The attorney for the insurance company who may also be representing the insured may not be the most objective if he is an employee for the insurance company.  The insurance company does not need to give the insured a defense if it can pay out as little as possible.  If involved in a lawsuit, do not put 100% trust even in the insurance defense attorney because he may have his own selfish interests at hand to settle and move onto his other work.  Sometimes people engage attorneys of their own even when they get a supposedly free attorney from the insurance policy.  The insurance defense attorney is known for his great work with the insurance company by saving money for the insurance company, not for the insured.

An insured faces insolvency or bankruptcy if a case goes to judgment. This increases the need to maximize the carrier's contributions to settlement. The risks for a carrier for failing to contribute increases when a carrier's refusal to settle causes the insured's bankruptcy.  This exposes the insurer to compensatory and punitive damage awards when carriers are wrong.

Companies already in bankruptcy may not be able to indemnify its directors or officers. A bankruptcy trustee pursuing claims for malfeasance against former directors and officers may object to insurance monies paid to the individuals' attorneys on the grounds that the policy is part of the bankruptcy estate. Most courts have concluded, even if the policy itself is part of the estate, the proceeds owed to individuals are not. Carriers have insisted on a comfort order from the bankruptcy court before paying out.

Rinne Legal helps people with bankruptcies and loan modifications in Contra Costa County, Sacramento County and Solano County. We have offices in Walnut Creek, Fairfield, Sacramento and Elk Grove. Contact Rinne Legal for a free consultation.  Follow Rinne Legal on Twitter @RinneLegal.  These blog posts are for informational purposes only and not intended nor should be construed as legal advice.  These blog posts may be considered attorney advertising in some states. Prior results described on blog posts do not guarantee similar outcomes in future cases or transactions.