Insured V. Insured Exclusion Bars Coverage For Liquidation Trustee's Suit Against Officers

The United States District Court for the Western District of Michigan has held that an Insured v. Insured Exclusion in a D&O policy bars coverage for a suit by a post-bankruptcy liquidation trustee against former officers of the insured company. See Indian Harbor Ins. Co. v. Zucker, No. 1:14-cv-01017, 2016 U.S. Dist. LEXIS 43148 (W.D. Mich. March 31, 2016). Troutman Sanders represents Indian Harbor in the case.

In the Indian Harbor action, the insured bank holding company and a subsidiary had filed for bankruptcy, and remained debtors in possession, with the same pre-petition officers controlling the companies throughout the bankruptcy proceedings. To gain creditors' support for their bankruptcy plan, the debtors agreed to create a liquidating trust to which any causes of action against their own officers would be assigned. However, the Liquidating Trust agreed not to pursue the officers' personal assets, but instead would limit its recovery to the company's D&O