Clarifying The Scope Of Bankruptcy Code 3rd-Party Injunction

By Craig Goldblatt and Nancy Manzer (September 14, 2018, 1:21 PM EDT) -- A recent Third Circuit decision has clarified the scope of the third-party injunction, including injunctions in favor of insurers that resolve insurance coverage in asbestos bankruptcy cases, that may be issued under Section 524(g) of the Bankruptcy Code. Liability covered by such an injunction must be "derivative" of the debtor, meaning that under state law, the third party's liability must depend on the debtor's liability. And it must be limited to liability that is "legally caused" by a statutory relationship (such as insurer, director, etc.) between the third party and the debtor....

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