Biltmore Associates, LLC v. Twin City Fire Ins. Co. (9th Cir. (Az.) July 10, 2009)
A bankrupt corporation assigned its claims to its creditors’ trust. The trustee for the creditors’ committee sued the insurer under a directors and officers liability insurance policy that excluded from coverage various claims brought by the insured corporation against its own officers or directors. The complaint was properly dismissed because a cause of action by a corporation against its officers or directors for mismanagement belongs to the corporation. The lawsuit was instigated and continued by the corporation, even though as a Chapter 11 “debtor and debtor in possession.” An assignee of a claim against an insurance company can have no stronger claim that the assignor who assigned it, and in the bankrupt corporation’s shoes, plaintiff’s claims are barred by the exclusion.
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By Toni L. Frain