Rejecting an insurer’s attempt to block confirmation of its insured’s bankruptcy plan, the Fourth Circuit found that an insurer cannot interpose itself into plan negotiations by invoking a duty to cooperate, or standing to object to the insurer’s “insurance neutrality.” Bankruptcy Plan.


  • An insured’s duty to cooperate under a liability insurance policy is limited to “customary litigation proceedings” and does not entitle an insured to participate in Chapter 11 plan negotiations.
  • A bankruptcy plan is “insurance neutral” if it does not impair a liability insurer’s pre-bankruptcy rights or increase its pre-bankruptcy obligations under a liability insurance policy.
  • Insurers do not have standing to object to uninsured restructuring plans.

inside In the truck. Exch. v. Kaiser Gypsum Co. (Re Kaiser Gypsum Co., 60 F.4th 73 (4th Cir. 2023), the U.S. Court of Appeals for the Fourth Circuit found that an insured’s duty to cooperate under its general liability insurance policy required the insured to aid and cooperate in litigation-related defenses, The insurer’s asbestos bankruptcy does not give its insurer the right to negotiate the terms of its Chapter 11 plan because the duty to cooperate is limited to “traditional litigation proceedings.” The Fourth Circuit also found that the insurer was not a “party in interest” and lacked standing to object to the plan because, without prejudice to the insurer’s rights and obligations under the policy, the plan was “insurance neutral.”

In 2016, Kaiser Gypsum Company, Inc. and its affiliate Hanson Permanente Cement, Inc. (collectively, “Kaiser”) filed for bankruptcy to address its environmental and asbestos-related tort liabilities. At the time of the filing, Kaiser was named as a defendant in nearly 14,000 asbestos-related lawsuits in state courts across the country.

Kaiser negotiated a largely consensual bankruptcy plan. The plan establishes a trust under US Bankruptcy Code section 524(g) — a special provision of the code designed for asbestos-related liabilities. The plan includes a “channeling order” under section 524(g) that prevents claimants from asserting their claims against Kaiser and instead directs current and future asbestos claimants to the trust. The Trust then assesses the claim according to a prohibited claims resolution procedure. The trust consists of a one-time $49 million cash contribution from Kaiser’s parent company, a five-year $1 million note issued by Kaiser, and the Truck Insurance Exchange (“ TRUCK ”).

Some of the asbestos claims filed against Kaiser were covered by the truck policy, while others were not. Under the plan, asbestos claims covered by the truck policy proceed against Kaiser in state court to collect the available insurance “in name only,” subject to a $500,000 per-claim cap under the policy. Notably, Truck’s rights to defend against parties claiming coverage under the policies were fully preserved under the Chapter 11 plan. Uncovered asbestos claims were referred directly to the Trust for assessment under the claims resolution procedure and were intended to limit payments to only valid claims, subject to mandatory disclosure and approval by claimants. Outside of the asbestos personal injury claim, the proposed plan would fully resolve all other unsecured outstanding liabilities, including any truck claims for Kaiser’s unpaid deductibles prior to bankruptcy.

Truck policies, which were in effect from 1965 to 1983, cover both defense and indemnity costs arising from asbestos personal injury claims, subject to certain exceptions. Under the policy, Truck is obligated to indemnify Kaiser (up to a per-claim cap of $500,000), with no aggregate limit. Instead, Kaiser pays a per-claim deductible of $5,000. Under the policy, Truck must investigate and defend each claim or lawsuit “even if [the] The claim or suit is baseless, false or fraudulent.”

In the district court, Truck objected to the plan on three main grounds. First, Truck argued that the plan was not offered in good faith because Kaiser did not extend the disclosure and authorization requirements to insured claims. Second, Truck objected to Kaiser’s request for a judicial declaration that Kaiser had not breached its aid and cooperation obligations or breached the implied covenant of good faith and fair dealing in connection with the bankruptcy plan negotiations. Third, Truck claimed that the proposed plan did not comply with section 524(g).

The district court overruled Truck’s objection that Truck lacked standing, and it accepted the bankruptcy court’s recommendation to confirm Kaiser’s Chapter 11 plan. Truck then appealed to the Fourth Circuit Court of Appeals.

the decision

The Fourth Circuit did not rule on the merits of Truck’s three plan affirmative objections, finding instead that Truck lacked objections because the plan was insurance neutral. (The circuit court’s analysis of the standing issue, however, effectively required it to review substantive issues related to Truck’s objection to the plan to determine whether the plan impaired Truck’s rights under its policy.) A Chapter 11 plan is insurance neutral if it does not. “increase the insurer’s pre-filing obligation or impair the insurer’s pre-filing policy rights.” Since the rights and obligations of insurers are not affected in an insurance neutral plan, those insurers have no opportunity to object, except to dispute whether a plan is insurance neutral.

Truck argued that it had standing to object to the plan because it barred Truck’s right to preserve coverage based on Kaiser’s alleged failure to fulfill its contractual duty to cooperate, and that such failure mandated a finding that Kaiser also breached the implied covenant of good. Faith and fair dealing. The cooperation clause of the truck policy states in relevant part that:

[Kaiser] will cooperate with [Truck]and on [Truck’s] Attends pleadings, hearings and trials and assists in enforcing settlements, securing and testifying, obtaining the attendance of witnesses and conducting litigation.

According to Truck, Kaiser’s obligation to “cooperate” with Truck and “assist in effecting the settlement” required Kaiser to help Truck secure the same disclosures and approvals from insured claim holders that were required from uninsured claim holders. The Fourth Circuit disagreed, finding that participating in hearings and trials, obtaining the attendance of witnesses, testifying and providing defense, and aiding and abetting the conduct of “proceedings” all indicate that the obligation does not apply only to “traditional litigation proceedings.” Discuss the bankruptcy plan. Indeed, the Fourth Circuit noted that Truck “could not cite a single court decision that such a policy’s cooperation provision covers an insured’s conduct in proposing a reorganization plan in a bankruptcy proceeding.” Therefore, Kaiser’s duty to cooperate did not entitle Truck to participate in the plan negotiations.

Moreover, relying on the fact that insurance policies must protect Truck against investigations and claims “even if such claims are unfounded, false or fraudulent,” the Fourth Circuit rejected Truck’s argument that the plan did not alter Truck’s rights and obligations. Require authorization and disclosure from insurance claimants. Thus, the Fourth Circuit declined to extend Kaiser’s obligations beyond the limits provided under the policy, concluding that Truck lacked standing. (The circuit court also found that Truck lacked Article III in his capacity as a creditor due to the unnecessary deductible, because the plan paid the entire discount, and its objections, which were based on lack of trust and consent of the trust. With section 524(g), the creditor as did not involve the interests of the truck.).


Based on this decision, insurers will not be allowed to intervene in bankruptcy plan negotiations by invoking the insured’s duty to cooperate, nor will they be required to object to an “insurance neutral” plan. The decision highlights an important aspect of bankruptcy planning for companies wishing to maintain the bargain advantage negotiated with insurers prior to bankruptcy, and it emphasizes the importance of careful plan drafting to preserve that bargain. In the absence of modified pre-bankruptcy rights or expansion of the insurer’s obligations by the plan, courts will continue to curtail insurers’ efforts to expand the insurer’s duty of cooperation.

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