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to be illegal under Texas law. The terms of the contract that are illegal are the essential part of the BSAs and are thus not severable.
Facts: Delta Financial Corporation and a number of its affiliates filed for bankruptcy. The Debtors filed this adversary proceeding against their insurers seeking a declaration that the insurers are required to provide defense costs and indemnification in connection with a pending (pre-petition) state court action against Delta Financial and certain of its officers and directors (the "D&Os"). The Debtors also seek damages from the insurers for their denial of coverage based upon a coverage exclusion provision. The underlying state court action was filed as a result of the Debtors' restructuring transactions.
Issue: Whether the insurers may properly deny coverage based upon the 'inadequate consideration' exception that existed in the policies.
Rule: New York applies a "'but for' analysis to interpret words such as 'arising out of' contained in insurance exclusion clauses... an exclusion applies, even as to claims not directly based on the subject of the exclusion, if the claim would not have arisen 'but for' the thing excluded." "A plaintiff need only prove that it was 'more likely' or 'more reasonable' that the alleged injury was caused by the defendant's negligence than by some other agency." Crucial to the 'but for' analysis is the act giving rise to the liability (not the theories pled, but the act).
Holding: The insurers properly denied coverage and all of the Debtors' claims are dismissed.
Reasoning: Based on the state court complaint, the court found that the 'act' giving rise to liability was the closing of the restructuring transaction whereby notes with a face amount of $153 million were surrendered in exchange for cash flow certificates and other assets that were worth around $110 million less than the notes. And, based on the language of the insurance policy exclusion, the "operative fact is explicitly covered by the exclusion." Therefore, there is no coverage under the insurance policy. Additionally, the court said that the insurers could not have waived their right to assert coverage exclusions in delaying their denial of coverage for many months because, as a matter of New York law, an insurer may not waive the right to assert an exclusion as a defense; nor are the insurers estopped from claiming the exclusion as a defense. Lastly, the court agreed that the adversary proceeding was a non-core matter.
Facts: Giant Eagle, Inc. and Valu Eagle (collectively, "Giant Eagle") appeal from a decision disallowing its claim (the "Claim") against the lessee-Debtor for future-rent damages that arose from the Debtor's rejection of a lease (the "Lease") for personal property. The Claim was disallowed on the basis that a substitute lease, if fully performed, would have mitigated the entirety of the Claim. The Debtor appeals the bankruptcy court's decision allowing Giant Eagle a portion of the administrative expenses for post-petition rent payments that were partially paid from the petition date until the Lease was rejected. The language of the Lease obligated the Debtor to pay liquidated damages equal to the present value of all future monthly payments at a 7% discount rate. Postrejection of the Lease, Giant Eagle found a substitute lessee in Snyder Drugstores, Inc.; the Snyder leases were independent from the Lease and had different duration and termination dates. However, Snyder also declared bankruptcy and rejected its leases with Giant Eagle. Unable to re-lease the
