IL Bad Faith Law / Asbestos

CA Fed. Ct. affirms BK Ct.’s award of IL §155 of fees, expenses, interest, statutory penalty and policy limits

The Bankruptcy Court for the Northern District of California awarded the Trustee of the CFB/WFB Liquidation Trust extra-contractual damages against Continental Casual Company (“Continental”) under Illinois Insurance Code 215 ILCS 5/155 for vexatious and unreasonable conduct due to its failure to provide coverage for asbestos claims.  The Trustee was represented by FrankGecker LLP, Chicago.

Continental appealed to the Northern District of California arguing that the Bankruptcy Court erred when it prevented Continental from presenting its argument that coverage did not exist over the vast majority of claims the Trustee submitted to it.  According to the district court, the Bankruptcy Court appropriately concluded that Continental had the opportunity to make that argument in the Plan’s claims process and in the Adversary Proceeding but failed to do so.  As such, it found that the Bankruptcy Court appropriately determined, under the doctrines of judicial and equitable estoppel, Continental was bound to the arguments it actually raised on the claims submitted and presented in the Adversary Proceeding.  The district court also ruled that the Bankruptcy Court appropriately concluded that Continental’s attempt to change course and belatedly raise the coverage issue was vexatious and unreasonable.  To read more about the bankruptcy court’s ruling, see Cas. Co. v. Chatz, Nos. 17-cv-05281-WHO, 17-cv-06989-WHO 2018 WL 4488312 (N.D. Cal.  Sept.  17, 2018).