Effect of Bankruptcy on Coverage
A Bankruptcy Court order allowing a claim against an insured does not constitute a judicial finding that the insured was liable in the claimed amount. In Wolkowitz, the insured’s bankruptcy trustee and the claimant reached an agreement on the amount of the claim. At a hearing, the Bankruptcy Court granted the trustee’s unopposed motion to approve the agreement and allow the claim. The trustee then filed an action for breach of contract against Redland, the insurer, alleging “that the bankruptcy court’s allowance of [the] claim constituted a ‘final judgment’ against [the insured] and that Redland is liable to the trustee in that amount.”
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