Truck Insurance Exchange v. Kaiser Gypsum Co. Inc., 22-1079 (Sup. Ct. June 6, 2024)
In Truck Insurance Exchange v. Kaiser Gypsum Co. Inc., 22-1079 (Sup. Ct. June 6, 2024) the US Supreme Court unanimously ruled that an Insurer for the bankruptcy debtor is a party in interest under 11 USC 1109(b) of the Bankruptcy code, and therefore has standing to object to a proposed Chapter 11 plan.
Reversing the Fourth Circuit today, the Supreme Court held that a chapter 11 plan that is “insurance neutral” does not deprive the insurer of standing to raise objections to the plan. For a unanimous Court, Justice Sonia Sotomayor said, “Courts must determine on a case-by-case basis whether a prospective party has a sufficient stake in reorganization proceedings to be a ‘party in interest’ ” under Section 1109(b).
Given that Congress intended for a “party in interest” in Section 1109(b) to be applied “broadly,” Justice Sotomayor held that insurers “with financial responsibility for bankruptcy claims are parties in interest” with standing to object to plans.
Justice Sotomayor said that “the Court today does not opine on the outer bounds of §1109.” Quoting the Collier treatise, she said that “a party in interest is ‘not intended to include literally every conceivable entity that may be in¬volved in or affected by the chapter 11 proceedings.’”