The Vermont Supreme Court has ruled in In Re Ambassador Ins. Co., 2015 VT 4 (Vt. Jan. 23, 2015) that the liquidator of Ambassador Insurance acted unreasonably in setting a December 31, 2013 bar date for policyholder claims arising out of asbestos and environmental liabilities, a decision that had been approved by the trial court supervising Ambassador’s liquidation. The Supreme Court sustained the objections made by National Indemnity Company, which is the assignee of rights under two excess insurance policies insuring A.P. Green Industries, a refractory company that recently emerged from Chapter 11 protection after its long-running bankruptcy aimed at resolving its large asbestos-related liabilities. The Supreme Court accepted National Indemnity’s argument that, given the existence of contingent and unliquidated claims of policyholders like A.P. Green, and ample assets available to pay policyholder claims, it was unreasonable to set a 2013 bar date notwithstanding the desire of the liquidator to begin paying lower priority general creditor claims.

The Ambassador decision is a victory for policyholders who many years ago purchased valuable long-term occurrence policies, and are exposed to liabilities based on claims where the event giving rise to the liability (e.g. exposure to asbestos or pollution many years ago) has already occurred, but claims have yet to be asserted or fully resolved. The Supreme Court observed that even though liquidation proceedings had been pending since 1987, it takes decades for long-tail claims to ripen and there was no evidence of any foot dragging on the part of the claimants.  The court ruled that “the mere duration of the liquidation process in and of itself is not a basis for bringing it to a close, thereby frustrating the goal of protecting policyholders and other creditors…”

National Indemnity was represented by Andre D. Bouffard, who leads DRM’s Appellate Litigation and Insolvency Litigation practices. This is the second successful appeal handled by Mr. Bouffard in the Ambassador case from a trial court decision upholding actions of the liquidator. In 2008, he represented National Indemnity Company in overturning the liquidator’s decision to disallow the claims as policyholder priority claims because they had been assigned by A.P. Green.