In Re United States Lines, Inc.

197 F.3d 631 (2nd Cir. 1999)

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Nature of the Case

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Facts

United States Lines (P) and its reorganization trust sued in the Bankruptcy Court seeking a declaratory judgment to establish the Trust's rights under various insurance contracts. On November 24, 1986, P filed Chapter 11. The Trust is their successor-in-interest pursuant to a plan of reorganization that was confirmed by the bankruptcy court on May 16, 1989. There are some 12,000 employees who have filed more than 18,000 claims, most of which are for asbestos-related injuries sustained while sailing on different ships in P's fleet over four decades. The Trust contends that these claims are covered by several Protection & Indemnity (P&I) insurance policies issued by four domestic and four foreign mutual insurance clubs. The proceeds of the P&I policies are the only funds potentially available to cover the employees' personal injury claims. Each of the P&I policies is a pay-first provision by which liability is not triggered until the insured pays the claim of the personal injury victim. The deductibles for each accident or occurrence vary among the different policies, ranging from $250 to $100,000. On December 8, 1992, the Bankruptcy Court entered a stipulation of conditional settlement between the Trust and an initial group of 106 claimants. On January 5, 1993, the Trust began this action as an adversarial proceeding in bankruptcy seeking a declaratory judgment of the parties' respective rights under the various P&I policies. The bankruptcy court held, that the Trust's declaratory judgment action was 'core' meaning it could be tried to binding judgment in the bankruptcy court and that the bankruptcy court had the discretion to deny the motion to compel arbitration filed by the four foreign Clubs. The district court reversed both determinations. This appeal resulted.