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Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A.

United States Supreme Court
530 U.S. 1 (2000)


Facts

When Hen House Interstate, Inc. (Hen House) filed for reorganization under Chapter 11 in September 1991, it owed its primary lender, Union Planters Bank, N.A. (Union) (defendant) more than $4 million. The debt to Union was secured by substantially all of Hen House’s assets. After the bankruptcy filing, Union agreed to lend Hen House an additional $300,000 for its continued operation during the reorganization process. The bankruptcy court issued a financing order that allowed Hen House to use the funds from Union to pay expenses, including workers’ compensation premiums. Hen House purchased workers’ compensation insurance from Hartford Underwriters Insurance Company (Hartford) (plaintiff), which was unaware of Hen House’s bankruptcy. Hartford continued to provide insurance despite Hen House’s failure to make monthly payments. In January 1993, Hen House’s reorganization was abandoned, the case was converted to a Chapter 7 liquidation, and a trustee was appointed. By that point, Hen House owed Hartford more than $50,000 in unpaid premiums. Hartford learned of the bankruptcy in March 1993. It applied to the bankruptcy court for payment of Hen House’s debt, as an administrative expense, to be taken out of Union’s collateral, pursuant to 11 U.S.C. § 506(c). The bankruptcy court decided in favor of Hartford, and the district court affirmed. A panel of the Court of Appeals for the Eighth Circuit also affirmed, but upon en banc review, the court reversed. Hartford petitioned the Supreme Court for certiorari.

Rule of Law

Issue

Holding and Reasoning (Scalia, J.)

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