Court Upholds Texas' "First Come, First Served" Approach When Claimant Demands Exceed Policy Limits

In a recent opinion, the Fifth Circuit reaffirmed and applied its holding from OGA Charters. In doing so, it blocked (via a bankruptcy adversary proceeding) one set of plaintiffs from keeping an insured's entire policy limit, which the insurer paid as per Texas' "first come first served" approach to time-limited policy limits demands.

When Can Liability Policy Proceeds Become Property of a Bankruptcy Estate?

In its prior ruling in OGA Charters, the Fifth Circuit addressed how bankruptcy and insurance law intersect in a multiple-claimant, insufficient liability limits situation.

In that case, an insured bus charter company with a $5 million liability policy faced multiple claims after one of its buses crashed, killing nine people and injuring 40 others. In response to demands, the insurer quickly entered into settlements with a small subset of the claimants which would have exhausted the entire $5 million limit, to the detriment of the other claimants.