Opinion ID: 2828797
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Text: replacements, products to or for, and all cash or non-cash proceeds of any of the foregoing, including insurance proceeds. It further provided that all rights thereunder were to be governed by Maine law, except where Maine's iteration of the UCC directed application of the law of the state in which MMA was located (Delaware). Wheeling sought to perfect its security interest by filing a UCC-1 financing statement with the Delaware Department of State. It took no other action to perfect an interest in any insurance policies that MMA might hold or come to hold. 1 Several of MMA's affiliates were parties to the line of credit, the Agreement, and a series of related transactions. For ease in exposition, we refer to MMA and its affiliates, collectively, as MMA. We similarly omit any discussion of parallel Canadian insolvency proceedings involving MMA's Canadian subsidiary. - 4 - In April of 2013, Travelers Property Casualty Company of America (Travelers) issued a commercial property insurance policy (the Policy) to MMA. The Policy granted MMA $7,500,000 of total coverage and contained a section purporting to cover business interruption. Within a matter of months, a calamitous incident of historic proportions brought the Policy into play. On July 6, an MMA freight train that included 72 tanker cars filled with oil derailed in Lac-Mégantic, Québec. The derailment sparked massive explosions, which destroyed part of Lac-Mégantic and killed 47 people. In the wake of this disaster, MMA filed a claim under the Policy for, inter alia, lost business income. Travelers denied the claim, asserting that it had not insured against business interruption. In early August, MMA filed a voluntary petition for protection under Chapter 11 of the Bankruptcy Code. See 11 U.S.C. § 301. Shortly thereafter, Robert J. Keach (the trustee) was appointed to serve as Chapter 11 trustee for MMA's railroad reorganization proceeding. See id. § 1163. Travelers moved for relief from the automatic stay, see id. § 362, so that it could seek a declaration that the Policy did not afford business interruption coverage. The bankruptcy court denied this motion. Wheeling — which by then was owed the entire $6,000,000 under the line of credit — soon instituted an adversary proceeding against MMA, Travelers, and the trustee in which it sought a - 5 - declaration regarding the nature, extent, validity, and priority of its asserted security interest in any payments due under the Policy. Without objection, the bankruptcy court stayed the adversary proceeding. Meanwhile, MMA and the trustee began negotiations with Travelers. Those negotiations culminated in a settlement that, in relevant part, required Travelers to pay $3,800,000 to MMA in satisfaction of all claims under the Policy. When the trustee moved for bankruptcy court approval of the settlement, Wheeling objected. Wheeling argued that the Agreement granted it a first-priority security interest in the proposed settlement. The gist of Wheeling's position was that it held a perfected security interest in all payment rights belonging to MMA and that the proposed settlement payment constituted proceeds of MMA's right to payment under the Policy, which — although contingent — arose at the time the Policy was issued. Initially, the bankruptcy court temporized: it granted the approval motion but ordered the funds held in escrow pending a determination of the rights of the parties and the priorities of their competing claims. The bankruptcy court later ruled that Wheeling's asserted security interest was unenforceable because Article 9 of the UCC does not apply to an interest in a claim under a policy of insurance and Wheeling had failed to perfect its interest under Maine common law. See MMA I, 2014 WL 1491301, at . Building on this foundation, the court concluded that MMA was - 6 - entitled to the settlement proceeds free and clear of Wheeling's asserted interest. See id. Wheeling appealed to the BAP, which affirmed. See MMA II, 521 B.R. at 715. This timely second-tier appeal ensued.