On May 1, 2012, the 3rd U.S. Circuit Court of Appeals ruled on
an issue that is of particular importance to insurers, but it may
also have wider application to the crafting of plans of
reorganization in the asbestos arena and elsewhere. Specifically,
the court held that debtor Federal-Mogul could transfer its rights
to recover under liability insurance policies to a trust set up
under its plan of reorganization for the benefit of asbestos
victims, even though the policies contained provisions prohibiting
their assignment. In re Federal-Mogul Global Inc., No.
09-2230, 2012 WL 1511773 (3d Cir. 2012).
The 3rd Circuit based its ruling on the preemption language
contained in Section 1123(a) of the federal Bankruptcy Code, which
provides for the implementa-tion of a plan of reorganization,
including by the transfer of property to a non-debtor,
"[n]otwithstanding any otherwise applicable non-bankruptcy
law." The court dismissed the attempts made by insurer
appellants to
