Insurance Neutrality in Chapter 11 Plans: Balancing Debtor and Insurer Rights in Pre-Petition Insurance Coverage

Settlement Trusts, Insurer Standing, Super-Preemptory Provisions, Plan Modification

A live 90-minute CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Wednesday, October 4, 2023 (in 4 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE webinar will address key issues that arise when the primary asset in a Chapter 11 case is liability insurance and the primary creditors are claimants to those proceeds. The panel will focus on using settlement trusts, the broad issue of standing to object to under 11 U.S.C. 1109, and the controversial concept of "insurance neutrality." The program will review the modification of confirmed plans and determining if rights have been modified by the Bankruptcy Code or the plan.


Insurance coverage is typically the debtor's only significant asset in a Chapter 11 case commenced to manage liability to a significant number of claimants--of which mass torts is just one possible type. A common solution is to put the insurance proceeds into a settlement trust for adjudication and distribution. How this result is achieved varies significantly depending on whether insurers, claimants, and the debtor can agree on the value of coverage and other key terms.

If the parties cannot agree, the debtor may propose a plan that conveys its coverage rights into a settlement trust and leaves the trust to litigate coverage. Plan proponents contend insurers lack standing to object to this arrangement if the plan is "insurance neutral" meaning it does not impermissibly abrogate rights and defenses for post-confirmation coverage litigation. But what rights can be affected and how much are hotly contested issues, and involve complex standing issues.

Insurers object that an assignment to a settlement trust fundamentally and impermissibly modifies insurer rights, such as to control or associate in the defense of claims, or increases the insurer's exposure through lax or undemanding claims resolution procedures. More recently, insurers have suggested that a plan which surreptitiously increases insurer risk and loss is not proposed in good faith, eliminates an insured's incentives to limit loss, and is unconfirmable.

Listen as this experienced panel of bankruptcy and insurance attorneys discusses "insurance neutrality" in Chapter 11 plans of reorganization.



  1. Development of doctrine of insurance neutrality
  2. Consensual "sale" of policy coverage to settlement trust
  3. Challenges created by requirement of insurance neutrality
  4. Non-consensual assignment of coverage rights
    1. Crafting insurance neutral plan language
    2. Insurer objections and recent cases
      1. Defense rights
      2. Cooperation
      3. Consent/no action
      4. Defenses and exclusions from coverage
      5. Arbitration and dispute resolution issues
  5. Plan modification: requirements and strategies


The panel will review these and other key issues:

  • Is some abrogation of certain policy rights permissible?
  • What is the distinction, if any, between assignment of rights under a contract, the delegation of duties under a contract, and the transfer of rights and obligations under a contract?
  • Are insurance companies guaranteed "insurance neutral" plans as a condition of confirmation or is insurance neutrality an issue of standing?
  • To what extent do insurers have standing to object to confirmation?


Burns, Timothy
Timothy W. Burns

Burns Bair

Mr. Burns combines a deep understanding of insurance law and the insurance industry with a broad understanding of the...  |  Read More

Parson, Kimberly
Kimberly Parson

Rebar Kelly

Ms. Parson is the managing partner of the firm’s New Jersey office. She has experience representing clients in...  |  Read More

Scharf, Ilan
Ilan D. Scharf

Pachulski Stang Ziehl & Jones

Mr. Scharf specializes in financial restructuring and bankruptcy litigation, with a particular focus on representing...  |  Read More

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