Better in Bankruptcy? Why Mass Tort defendants are filing for Bankruptcy and How it Affects Insurers

Filing for bankruptcy is a drastic step that some corporations facing mass tort liabilities are taking – including Boy Scouts of America, opioid manufacturers, archdioceses, and others. The bankruptcy filings suggest that these defendants are facing exposures that threaten their financial existence and that the bankruptcy process provides strategically beneficial protections. For insurers, the consequences of a policyholder in bankruptcy are significant. And, while the nuances of bankruptcy filings and protections are vast, there are emerging themes that spark discussion.

Due to the complexity of strategies, facts, and claims – as well as the complexity of Bankruptcy Code and its application – there is no universal perspective with respect to advantages or disadvantages of a bankruptcy filing. As bankruptcy filings continue to make headlines, insurers will benefit from more detailed understandings of the nuances, pressures and influences that shape their positions. In this trend spotlight, we take a look at understanding why bankruptcy is an option companies are pursuing and share considerations for insurers who are evaluating the implications of bankruptcy.