Abstract
Insurers have traditionally been denied “party in interest” status under the Bankruptcy Code due to the longstanding insurance neutrality doctrine. The insurance neutrality doctrine prevents insurers from challenging a chapter 11 bankruptcy plan as a section 1109(b) “party in interest” if the plan does not increase the insurance company’s liability from pre-bankruptcy levels. If none of their rights or obligations were impacted by the plan, insurance companies were previously left without a means to challenge a proposed reorganization plan. As a result, insurance companies providing liability insurance to corporations stricken with mass tort lawsuits ran the risk of becoming the principal asset of a bankruptcy trust with no chance to object to a proposed plan.
The Supreme Court addressed this issue in Truck Insurance Exchange v. Kaiser Gypsum, where the Court determined that insurers with financial responsibility for a bankruptcy claim may qualify as a party in interest under section 1109(b). The Truck Insurance Exchange decision raises questions about the continued viability of the insurance neutrality doctrine and the potential effects of a broadening of the party in interest status. This comment argues that the insurance neutrality doctrine should be declared dead. In addition, this comment reasons that a new test should be introduced to define what constitutes financial responsibility under section 1109(b). This new test would consist of two steps. The initial step would require the objecting party to present evidence of its asserted financial responsibilities. The following step would require that same objecting party to prove the efficacy of its objection in relation to its claimed financial responsibilities.
Recommended Citation
Mikaela DeLeon,
Insurance and Chapter 11 Bankruptcy: Is the Insurance Neutrality Doctrine Dead?,
42
Emory Bankr. Dev. J.
87
(2026).
Available at:
https://scholarlycommons.law.emory.edu/ebdj/vol42/iss1/3