Dealing with Insurers in Liquidation
Insurer insolvency has become an increasingly significant concern. Since 1969, more than 400 property and casualty insurers have been placed in liquidation. The past 5 years have seen several larger commercial insurers go into liquidation, among them The Home Insurance Company and Reliance Insurance Company. Indeed, from just 2001 to 2003, Guaranty Associations paid approximately $5 billion in covered claims — more than half the $10 billion they had paid in the previous 31 years from their inception. This article addresses what creditors need to know when dealing with a financially troubled insurer.
California Tax Update
There may be gold in them California hills. But there's a price to be paid when panning for it. It has become clear that leasing companies need to exercise particular vigilance when operating in the Golden State.
Seventh Circuit Finds 'Floating' Forum Selection Clauses Valid
The sale of individual equipment leases from one equipment lessor to another, or entire portfolios of equipment leases, is common practice in the United States. One component that parties interested in purchasing equipment leases or portfolios of equipment leases desire in the equipment lease contract is a choice of forum clause that provides the flexibility for the purchasing party to initiate litigation in its own home state. However, the enforceability of forum selection clauses providing for one or more appropriate forums has been the question of some debate both in the federal and state courts. Recently, the Seventh Circuit Court of Appeals issued an opinion coming down squarely in favor of the enforceability of such forum selection clauses.
In the Marketplace
Highlights of the latest equipment leasing news from around the country.
Post-Petition Enforcement Against the Seller of Contracts for the Sale of Goods
Generally speaking, after a bankruptcy filing, executory contracts are not enforceable against a debtor that has not yet assumed the contract. <i>N.L.R.B. v. Bildisco and Bildisco</i>, 465 U.S. 513, 531 (1984). However, the reverse is not true. During the pre-assumption period the non-debtor party to the contract is presumed to be obligated to perform in accordance with a contract. Howard C. Buschman III, <i>Benefits and Burdens: Post-Petition Performance of Unassumed Executory Contracts</i>, 5 Bankr. Dev. J. 341, 346, 359 (1988); <i>Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.)</i>, 973 F.2d 1065, 1075 (3d Cir. 1992); <i>McLean Indus., Inc. v. Med. Lab. Automation, Inc. (In re McLean Indus., Inc.)</i>, 96 B.R. 440, 449 (Bankr. S.D.N.Y. 1989). Of course, a debtor who elects to receive the benefits of a contract while deciding whether to assume or reject the contract is expected to pay for the value of the goods and services received in accordance with the contract. As the Supreme Court noted in <i>Bildisco</i>, 465 U.S. at 531, 'If the debtor-in-possession elects to continue to receive benefits from the other party to an executory contract pending a decision to reject or assume the contract, the debtor-in-possession is obligated to pay for the reasonable value of those services ... ' <i>See also Schokbeton Indus., Inc. v. Schokbeton Prods. Corp. (In re Schokbeton Indus., Inc.)</i>, 466 F.2d 171, 175 (5th Cir. 1972).
Forbearance Agreements: A Useful Tool for Lenders After Default
With a borrower in default and facing the threat of imminent litigation or bankruptcy, both lenders and borrower are increasingly looking to the appealing alternative of forbearance agreements. These are arrangements whereby lenders refrain from exercising their available default remedies in exchange for certain concessions from the borrower. Depending on the circumstances, forbearance agreements give lenders an alternative to the expenses and delays associated with litigation or bankruptcy. Forbearance agreements can also be used to take the place of a more long-term modification of the parties' arrangement. Accordingly, a forbearance usually gives up little on the part of the lender, but allows the lender to secure a number of benefits that will be very helpful in the event of a subsequent default by the borrower.
Dealer Protection Statutes Level the Playing Field for Heavy Equipment Dealers
Dealers who sell and lease expensive heavy equipment, and therefore those who finance them, are often at the mercy of the manufacturers whose products the dealers sell or lease. Disparities in bargaining power between a local equipment dealership and a national or international manufacturer can force the dealership to accept unfair or oppressive terms. And if the manufacturer arbitrarily terminates the dealership agreement, the thriving business that the equipment dealer built can be totally ruined, often with little or no legal recourse, thereby also putting those who finance the dealer at peril.
In the Marketplace
Highlights of the latest equipment leasing news from around the country.
