Owners of Bankrupt Firm Can Sue Insurer

(CN) – A couple can sue an insurance company for contacting their clients while their construction company moved through bankruptcy, the 5th Circuit ruled.

     Contractor Technology Ltd. owners Theodore and Deeann Labuzan claimed St. Paul Fire & Marine Insurance Co. illegally told their clients in May 2005 that the company was going bankrupt, and warned them that if they paid the company, St. Paul would deduct the amount from any future liability payments.
     The district court tossed the ruling, saying the Labuzans lacked standing because the company owned the claims, not them.
     But Congress designed the automatic stay provision to “provide both debtor and creditor protection,” the New Orleans-based circuit ruled.
     Claims of automatic stay violations are not the sole property of the bankruptcy estate, the ruling states. As creditors of the construction company, the Labuzans have standing to assert a claim.

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