Minoco Group of Companies, Ltd. v. First State Underwriters Agency of New England Reinsurance Corp.

Appellants First State Underwriters Agency of New England and First State Insurance Company (collectively, “First State”) are affiliated insurance companies that issued prepaid excess officers and directors liability policies to The Minoco Group of Companies (“Minoco”). The policies provided coverage only for “claims made” from November 24, 1982, through July 1, 1984, but permitted either party to cancel the policies at any time upon thirty days’ notice. In November 1983, two months after Minoco filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code (the “Code”), 11 U.S.C. §§ 1101-1174 (1982), First State gave Minoco notice of cancellation of the policies. Minoco then brought this action in bankruptcy court seeking a declaratory judgment that cancellation of the policies was automatically stayed by section 362(a) of the Code, as well as an injunction prohibiting First State from cancelling the policies.

After an evidentiary hearing, the bankruptcy court made a finding of fact that if First State were permitted to cancel the policies, Minoco would be required to indemnify present and former officers and directors for legal expenses and judgments…