Allied World Specialty Insurance Company and Hudson Insurance Company are trying to move a live insurance-coverage fight outside the bankruptcy stay, creating a near-term litigation issue around potential recoveries for the Chapter 7 estate. Allied World’s relief-from-stay motion seeks authority to file a declaratory judgment action against the Chapter 7 Trustee over a second-layer excess D&O policy tied to the trustee’s adversary proceeding against non-debtor insiders, arguing the policy does not provide coverage because of a bankruptcy sublimit and lack of exhaustion of underlying limits. Hudson’s joinder and separate stay-relief request targets its first-layer excess policy, citing an exclusion and the alleged failure to exhaust the $2.5 million QBE layer.
The court set a contested briefing track: responses are due June 24, replies July 10, and the hearing is continued to July 21 at 10:00 a.m. under the scheduling order. The practical issue is whether insurance proceeds remain available to support the trustee’s litigation strategy and creditor recoveries, or whether key insurer defendants can force an early coverage determination before the estate spends further resources pursuing the underlying claims.
