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Truck Insurance Exchange v. Kaiser Gypsum Company, Inc.

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Supreme Court of the United States
Truck Insurance Exchange v. Kaiser Gypsum Company, Inc.
Term: 2023
Important Dates
Argued: March 19, 2024
Decided: June 10, 2024
Outcome
reversed and remanded
Vote
8-0
Majority
Chief Justice John Roberts • Clarence Thomas • Sonia Sotomayor • Elena Kagan • Neil Gorsuch • Brett Kavanaugh • Amy Coney Barrett • Ketanji Brown Jackson

Truck Insurance Exchange v. Kaiser Gypsum Company, Inc. is a case that was decided by the Supreme Court of the United States on June 6, 2024, during the court's October 2023-2024 term. The case was argued before the Supreme Court of the United States on March 19, 2024.

HIGHLIGHTS
  • The issue: The case concerned Chapter 11 bankrupcies. Click here to learn more about the case's background.
  • The questions presented: Whether an insurer with financial responsibility for a bankruptcy claim is a “party in interest” that may object to a Chapter 11 plan of reorganization.[1]
  • The outcome: In a 8-0 opinion, the court reversed and remanded the judgment of the United States Court of Appeals for the Second Circuit, holding that an insurer with financial responsibility for bankruptcy claims is a “party in interest” that can object to a Chapter 11 plan of reorganization. According to SCOTUS, these insurers “may raise and may appear and be heard on any issue” in a Chapter 11 case.[2]


    • The case came on a writ of certiorari to the United States Court of Appeals for the Second Circuit. To review the lower court's opinion, click here.

    Timeline

    The following timeline details key events in this case:

    Background

    Truck Insurance Exchange v. Kaiser involves Chapter 11 bankruptcies. The Court was asked to determine who can be considered a "party in interest" in bankruptcy court. Specifically, whether an insurer can be considered a "party in interest" who is eligible to raise objections to a reorganization plan under Chapter 11 of the Bankruptcy Code.[1]

    Section 524(g) of the U.S. Bankruptcy Code permits a debtor facing substantial asbestos-related liabilities to direct both existing and prospective asbestos claims into a trust that is funded by the debtor. To qualify for relief under this code, a representative for future claimants must be appointed, a plan that is fair to current and future claimants must be created, and 75% of claimants must approve the plan by vote.[1][3][4][5]

    Kaiser Gypsum Company, Inc., and Hanson Permanente Cement, Inc., (collectively, the Respondents) used to sell products containing asbestos and have been named in over 38,000 asbestos-related lawsuits since 1978. In 2016, the Respondents filed for Chapter 11 bankruptcy and established a § 524(g) trust. The reorganization plan required Truck Insurance Exchange (Truck) to investigate and defend each asbestos claim brought against the Respondents between the 1960s and 1980s. Truck argued that the plan did not provide anti-fraud measures and opposed the plan. They were the only objector to the plan.[3][4][5]

    The district court confirmed the plan despite Truck's objections because Truck was not considered a "party in interest". The United States Court of Appeals for the Second Circuit affirmed the district court's ruling.[3][4]

    Questions presented

    The petitioner presented the following questions to the court:[1]

    Questions presented:
    “ Whether an insurer with financial responsibility for a bankruptcy claim is a “party in interest” that may object to a Chapter 11 plan of reorganization.

    [6]

    		”

    Oral argument

    Audio

    Audio of oral argument:[7]



    Transcript

    Transcript of oral argument:[8]

    Outcome

    In a 8-0 opinion, the court reversed and remanded the judgment of the United States Court of Appeals for the Second Circuit, holding that an insurer with financial responsibility for bankruptcy claims is a “party in interest” that can object to a Chapter 11 plan of reorganization. According to SCOTUS, these insurers “may raise and may appear and be heard on any issue” in a Chapter 11 case.[2] Justice Sonia Sotomayor delivered the opinion of the court. Justice Samuel Alito took no part in the consideration or decision of the case.[2]

    Opinion

    In the court's majority opinion, Justice Sonia Sotomayor wrote:[2]

    “

    The Bankruptcy Code allows any “party in interest” to “raise” and “be heard on any issue” in a Chapter 11 bankruptcy. 11 U. S. C. §1109(b). The question in this case is whether an insurer with financial responsibility for a bankruptcy claim is a “party in interest” under this provision.
    Truck Insurance Exchange (Truck) is the primary insurer for companies that manufactured and sold products containing asbestos. Those companies filed for Chapter 11 bankruptcy after facing thousands of asbestos-related lawsuits. Truck is obligated to pay up to $500,000 per asbestos claim covered under its insurance contracts with the companies. Truck sought to object to the companies’ bankruptcy reorganization plan primarily because the plan lacked disclosure requirements that Truck thought could save it from paying millions of dollars in fraudulent claims.
    The Court of Appeals concluded that Truck was not a “party in interest” because the reorganization plan was “insurance neutral”; that is, the plan neither increased Truck’s prepetition obligations nor impaired its rights under the insurance contracts. This Court disagrees. The insurance neutrality doctrine conflates the merits of an insurer’s objection with the threshold §1109(b) question of who qualifies as a “party in interest.” Section 1109(b) asks whether the reorganization proceedings might directly affect a prospective party, not how a particular reorganization plan actually affects that party.
    Truck is a “party in interest” under §1109(b). An insurer with financial responsibility for a bankruptcy claim is sufficiently concerned with, or affected by, the proceedings to be a “party in interest” that can raise objections to a reorganization plan. Section 1109(b) grants insurers neither a vote nor a veto; it simply provides them a voice in the proceedings. [6]

    		”
    —Justice Sonia Sotomayor

    Text of the opinion

    Read the full opinion here.

    October term 2023-2024

    See also: Supreme Court cases, October term 2023-2024

    The Supreme Court began hearing cases for the term on October 2, 2023. The court's yearly term begins on the first Monday in October and lasts until the first Monday in October the following year. The court generally releases the majority of its decisions in mid-June.[9]


    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 Supreme Court of the United States , "TRUCK INSURANCE EXCHANGE, v. KAISER GYPSUM COMPANY, INC., ET AL, On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fourth Circuit" May 3, 2023
    2. ↑ 2.0 2.1 2.2 2.3 U.S. Supreme Court, "TRUCK INSURANCE EXCHANGE v. KAISER GYPSUM CO., INC., ET AL. ," June 7, 2024
    3. ↑ 3.0 3.1 3.2 United States Court of Appeals, Fourth Circuit "Truck Ins. Exch. v. Kaiser Gypsum Co. (In re Kaiser Gypsum Co.)," February 14, 2023
    4. ↑ 4.0 4.1 4.2 Oyez, "Truck Insurance Exchange v. Kaiser Gypsum Company, Inc.," accessed January 22, 2024
    5. ↑ 5.0 5.1 Supreme Court of the United States, "TRUCK INSURANCE EXCHANGE v. KAISER GYPSUM COMPANY, INC.,BRIEF IN OPPOSITION," September 5, 2023
    6. ↑ 6.0 6.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    7. ↑ Supreme Court of the United States, "Oral Argument - Audio," argued March 19, 2024
    8. ↑ Supreme Court of the United States, "Oral Argument - Transcript," argued March 19, 2024
    9. ↑ SupremeCourt.gov, "The Supreme Court at Work: The Term and Caseload," accessed January 24, 2022
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