Opinion ID: 1060083
Heading Depth: 3
Heading Rank: 1

Heading: Retraction of Disavowal as Assumption of Fidelity Treaty

Text: Swiss Re asserts that the deputy receiver's retraction of his prior disavowal of the Fidelity treaty constituted an assumption of the contract. As such, Swiss Re contends that this step gave rise to an irrebuttable presumption that the deputy receiver recognized the Fidelity treaty as beneficial to the receivership estate, that an actual benefit was conferred on that estate, and that the obligations incurred under the Fidelity treaty are therefore expenses of administration entitled to priority under Code § 38.2-1509. We need only address this issue to the extent that it bears upon Swiss Re's ultimate contention that it is entitled to administrative priority. Clearly, without an assumption of the Fidelity treaty, Swiss Re was an unsecured creditor of Fidelity. Swiss Re asserts that the Fidelity treaty was an executory contract, and, thus, once disavowed, any resumption of the contract would necessarily constitute an assumption of Fidelity's rights and obligations under the contract. In support of its position, Swiss Re relies upon authority in bankruptcy law that an assumption need not be express, so long as the intent of the debtor-in-possession is clear. See, e.g., In re A.H. Robins Co., 68 B.R. 705, 708 (Bkrtcy.E.D.Va.1986). However, Swiss Re properly notes on brief that [g]eneral principles of bankruptcy law [are] not technically applicable in state insurance company receivership proceedings and we will not address that matter here. Rather, we will assume that the Fidelity treaty was an executory contract. We agree with Swiss Re that, under the authority granted to the deputy receiver by the Commission's order, the Fidelity treaty was subject to assumption by the deputy receiver. We fail to see, however, how the deputy receiver's election, at Swiss Re's behest, to retract his prior decision and treat the Fidelity treaty as [if] it was never disavowed and to restore the status quo ante  evinces an intent to assume the contract. To the contrary, the clear intent as expressed by the language in the deputy receiver's decision was to make his prior act a nullity and to restore Swiss Re to its original position. In that position, Swiss Re was an unsecured creditor of Fidelity for both prior and succeeding claims under the Fidelity treaty.