D&Os may be exposed in corporate bankruptcy; when suits against them are likely, directors and officers may be unprotected by policies

Article Abstract:

Directors' and officers' liability insurance may not provide much protection if corporate officers may be left to deal with suits arising from the corporate bankruptcy on their own. Measures such as obtaining an extension of the bankruptcy stay to include underlying lawsuits against incumbent corporate officers are possible but may fail. The enforceability of clauses in some D&O policies stating that the policy's limits are available first to meet the claims of individual D&Os under the liability portions of the policies is untested. Contractual provisions purposting to take effect upon bankruptcy may not be much help.

United States, Corporate reorganizations, Directors' and officers' liability insurance

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Claims can reach estate assets' buyer; some courts have held that purchasers of assets in a bankruptcy are not necessarily insulated from successor-liability claims

Article Abstract:

Purchasers of a debtor's estate assets may be open to successor-liability claims under some courts' rulings. Three issues affect the determination: the protection afforded by Sec 363 of the Bankruptcy Code, whether discharge of the debtor bars liability for the purchaser, and whether the injury occurred after a reorganization plan was confirmed or bankruptcy ended. Generally the purchaser should ensure a plan of reorganization is in place that specifically discharges all claims aganst the debtor.

Debtor and creditor, Liability of successor corporations, Corporate succession liability

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