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SVB: Court OKs defense costs for D&Os, overrules committee objection
By Sarah Lizee
Olympia, Wash., May 22 – SVB Financial Group received court approval for the payment of defense costs of directors and officers of the company via insurance policies, according to an opinion filed Monday with the U.S. Bankruptcy Court for the Southern District of New York.
The court overruled an objection from the official committee of unsecured creditors.
The committee had argued that the proceeds of the insurance policies are property of the debtor’s estate, and that uncontrolled payment of defense costs has the potential to several diminish available proceeds that would otherwise benefit the debtor’s estate.
When an insurance policy only provides direct coverage to a debtor, courts generally rule that the proceeds are property of the estate, bankruptcy judge Martin Glenn said.
However, when an insurance policy provides exclusive coverage to directors and officers, courts have generally held that the proceeds are not property of the estate, he said.
“The issue here is to what extent the directors and officers can access proceeds of the D&O policies to fund their defenses in covered actions, notwithstanding the fact that under some of the policies the debtor is also an insured party,” Glenn said in the opinion.
“The court concludes that with respect to the ABC policies, regardless of whether the stay applies to the policies, there is cause to lift the stay to allow the directors and officers to access proceeds of these policies.”
The financial services and bank holding company is based in Santa Clara, Calif. The company filed bankruptcy on March 17 under Chapter 11 case number 23-10367.
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