Opinion ID: 1198150
Heading Depth: 3
Heading Rank: 2

Heading: Circle K's Insolvency

Text: 39. Lexington argues that the unsecured claim in Circle K's bankruptcy does not suffice as a payment of the $250,000 SIR. This argument is refuted by Lexington's own policy which guarantees the payment of loss whether the underlying insurance is recoverable or not. [17] Additionally, should underlying coverage lapse, Lexington is liable to the same extent as it would have been had the insurance been maintained in full effect. [18] The satisfaction of the SIR with an unsecured bankruptcy claim reasonably falls within the class of insurance that has not been maintained in full effect and may not be recoverable. 40. Public policy supports this construction of Lexington's contract. It is the debtor in need of financial relief who receives the protections granted by the bankruptcy process. Such benefits were never intended to absolve third parties of debts they share in common with the debtor. Landsing Diversified Properties-II v. First Nat'l Bank & Trust Co. (In re Western Real Estate Fund, Inc.), 922 F.2d 592, 600 (10th Cir.1990), modified on other grounds, Abel v. West, 932 F.2d 898 (10th Cir.1991). To conclude otherwise would bestow a windfall upon insurers. West v. White (In re White), 73 B.R. 983, 985 (Bankr.D.D.C.1987); Jessie v. Honosky (In re Honosky), 6 B.R. 667, 669 (Bankr. S.D.W.Va.1980). [I]f an insurance company is as a matter of state law liable to a plaintiff in a personal injury action, subsequent discharge of the assured in bankruptcy does not alter the obligation of the insurance company. It seems clear that it is the policy of the law to discharge the bankrupt but not to release from liability those who are liable with him. In re Bracy, 449 F.Supp. 70, 71 (D.Mont. 1978). We disagree with cases that have expressed a contrary opinion. See, e.g., New Process Baking Co. v. Federal Ins. Co., 923 F.2d 62, 63 (7th Cir.1991) ([T]he insolvency of the underlying insurer ... cannot trigger the excess insurer's obligation to pay.).