The Permissibility of Bringing an Action Against Johns-Manville’s Insurers Despite Injunctive Orders
Document Type
Research Memorandum
Publication Date
2016
Abstract
(Excerpt)
It is well known that bankruptcy courts have jurisdiction over all of the property of the debtor’s estate, no matter where the estate is located. Bankruptcy courts have the power to preserve that jurisdiction by enjoining proceedings that would remove property from the bankrupt estate. Title 11 of the United States Code (the “Bankruptcy Code”) has broadly defined property of the estate as “all legal or equitable interests of the debtor in property as of the commencement of the case.” Section 541(a)(1) of the Bankruptcy Code has been defined broadly to include “all kinds of property, including tangible or intangible property.” As one example, courts have determined that a debtor’s insurance policies are to be construed as property of the estate, and are therefore subject to the bankruptcy court’s jurisdiction. It is now well-settled that under § 541(a)(1) of the Bankruptcy Code that “a debtor's liability insurance is considered property of the estate.” Furthermore, “an overwhelming majority of courts have concluded that liability insurance policies fall within § 541(a)(1)'s definition of estate property.” An issue that has arisen is whether the bankruptcy court has jurisdiction to protect a debtor’s interest in its insurance policies through injunctive orders, and guidance has come in several decisions.
Johns-Manville was formerly a Fortune 500 company that operated mining, manufacturing, and forest products businesses. Johns-Manville is most well-known as the world’s largest miner and producer of raw asbestos products, selling raw asbestos in 58 countries and distributing asbestos-based products across a broad range of industries. Johns-Manville then became the center of a number of products liability lawsuits alleging personal injuries as a result of asbestos exposure. This resulted from numerous scientific studies that linked exposure to asbestos fibers to respiratory conditions, such as lung cancer. In the 1980s, Johns-Manville was named the defendant in over 12,000 lawsuits brought by over 16,000 claimants, with additional suits being filed consistently, resulting in over 400 new suits every month. The significant source of strain on the company was the possibility of facing tens of thousands of lawsuits from unknown asbestos victims, as a person exposed to Johns-Manville asbestos may not develop an identifiable injury for decades. As a result of the potential for future liability, Johns-Manville filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in August of 1982.