Opinion ID: 32591
Heading Depth: 2
Heading Rank: 2

Heading: Chapman's Authority to Proceed Against Third Parties

Text: 12 Chubb first asserts that Chapman is forever barred from proceeding against Coho's insurers because he failed to file a proof of claim in Coho's Chapter 11 proceedings. 5 Chubb's argument in this regard is based largely on perceived policy considerations. According to Chubb, Chapman's failure to file a proof of claim or otherwise notify the bankruptcy court of its debt frustrates the very purpose of the Bankruptcy Code and prevents an orderly administration of the debtor's estate. 13 We and other courts have squarely rejected Chubb's argument; it is entirely without merit. 11 U.S.C. § 524(a) operates as an injunction against actions against a debtor subsequent to a discharge of a debt. 6 The bankruptcy discharge and § 524 injunction serve to give the debtor a financial fresh start. 7 As a general rule, a creditor must file a proof or notice of claim during bankruptcy proceedings to preserve its claim against the debtor. If a creditor neglects to file such notice, the § 524 injunction will act to shield the debtor  from the creditor. 8 14 The discharge and injunction, however, are expressly designed to protect only the debtor, and do not affect the liability of any other entity for the debt. 9 Accordingly, courts are in near unanimous agreement that § 524(e) permits a creditor to bring, and proceed in, an action nominally directed against a discharged debtor for the sole purpose of proving liability on its part as a prerequisite to recovering from its insurer. 10 In Houston v. Edgeworth (In re Edgeworth), 11 we endorsed this approach, explaining that it makes no sense to allow an insurer to escape coverage for injuries caused by its insured merely because the insured receives a bankruptcy discharge and noting that [s]uch a result would be fundamentally wrong. 12 15 In short, even though Chapman's failure to file a proof of claim in Coho's bankruptcy proceedings is a bar to continued prosecution of claims against Coho, it does not affect his claims against non-debtors, such as general liability insurers. The `fresh-start' policy is not intended to provide a method by which an insurer can escape its obligations based simply on the financial misfortunes of the insured. 13 The district court properly granted Chapman's motion for authority to proceed against Coho's insurers. 14 16