Fuller-Austin Decision is Reversed By California Appellate Court
On January 19, 2006, the California appeals court for the Second Appellate District reversed a lower court's ruling that the confirmation of Fuller-Austin Insulation Co.'s prepackaged bankruptcy plan triggered the excess insurers' indemnity for present and future asbestos-related claims.
The California appeals court ruled that the lower court erred in finding that a bankruptcy plan confirmation triggers an insurer's indemnity for all present and future claims. The appeals court found that the confirmation had the effect of a settlement, which the insurers have a right to challenge. The appeals court did uphold the lower court's finding that the insurers had been afforded a reasonable opportunity to participate in the settlement negotiations of Fuller-Austin's prepakaged bankruptcy, however the insurers' failure to participate did not waive any of their rights to object to the fairness and reasonableness of the settlement.
The matter was reversed in part and remanded for re-trial. (Fuller-Austin Insulation Co. v. Highlands Insurance Co., et al., No. B170079, Calif. App., 2nd Dist.)