TRUCK INSURANCE EXCHANGE V. KAISER GYPSUM COMPANY, INC
Fourth Circuit says there’s nothing in the Bankruptcy Code requiring ‘anti-fraud’ provisions in a mass tort chapter 11 plan. The appeals court also holds that an ‘asbestos’ plan isn’t filed in bad faith when the plan gives an insurer no more rights than the insurer has under its policy.
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 21-1858 (4th Circuit, Apr 29,2025) Published
- Tag(s):
- Ruling:
- On remand, the Fourth Circuit affirmed the bankruptcy court’s and district court’s approval of the debtors’ chapter 11 reorganization plan. The Fourth Circuit found that the plan was proposed in good faith as required by § 1129(a)(3), and that it satisfied the various requirements of § 524(g), which governs asbestos-driven reorganization plans.
- Procedural context:
- This case was remanded to the Fourth Circuit following a Supreme Court ruling that Truck Insurance Exchange was a “party in interest” entitled to challenge the reorganization plan. The Supreme Court had reversed the Fourth Circuit’s earlier decision dismissing Truck’s appeal based on lack of standing. On remand, the Fourth Circuit considered the merits of Truck’s substantive objections to the plan which had been rejected by the lower courts.
- Facts:
- Kaiser Gypsum manufactured asbestos-containing products for decades and had been named in over 38,000 asbestos-related lawsuits. Truck provided non-eroding primary liability insurance to Kaiser, requiring Truck to investigate and defend each covered claim, even if “groundless, false or fraudulent,” and to indemnify Kaiser up to a per-claim limit (typically $500,000). The reorganization plan established a § 524(g) trust funded by: (1) rights to non-eroding insurance coverage under Truck’s policies; (2) a one-time $49 million contribution from Kaiser’s parent company; and (3) a secured five-year $1 million note from Kaiser. The plan treated insured and uninsured asbestos claims differently - insured claims would be pursued in the tort system (with the debtors as defendants in name only), while uninsured claims would be resolved through the trust’s administrative process. Truck objected primarily because while uninsured claimants were required to provide anti-fraud disclosures and authorizations to the trust, insured claimants (whose claims would be defended and paid by Truck) were not subject to the same requirements.
- Judge(s):
- King, Agee, Quattlebaum