Bankruptcy trustee not part of the company

National Union Fire Insurance of Pittsburgh (a member of AIG) sought to avoid cover for the defence of directors and officers of a bankrupt retailer, County Seat Stores Inc, as this was excluded in the policy terms. However, bankruptcy court judge Cornelius Blackshear ruled that while coverage was excluded where the company sued its own officers, the bankruptcy trustee was distinct from the bankrupt company so defence cover must be supplied to the retailer’s officers in a claim seeking US$100mn for breach of fiduciary duty, corporate waste and mismanagement. In similar circumstances US Circuit Courts of Appeal have upheld rulings barring cover while federal courts have ruled that insurers cannot use the ‘insured v insured’ exclusion.