Threat to Self-Insurance by Federal Bankruptcy Court Evaded
U.S. Bankruptcy Court, District of Maine, has ruled that the letters of credit and surety bonds posted by the Prime Tanning Company to secure its workers’ compensation self-insurance obligations are not the property of the company’s estate. Prime Tanning (referring to leather) filed for Chapter 11 Bankruptcy Protection in 2010 and has operations in Maine and Missouri.
This overturned a Preliminary Injunction issued by a U.S. Bankruptcy Judge. Leading the successful effort for the State of Maine was its Assistant Attorney General Elizabeth Wyman. At the State Self-Insurance Guaranty Fund Administrators session of the National Council’s 2012 annual meeting, Ms. Wyman gave a major presentation and answered numerous questions about the issues of the Prime Tanning case.
Had the Preliminary Injunction become permanent, the self-insurance of workers’ compensation in all states would have been endangered. State commissioners of workers’ compensation could no longer be assured that collateral, designated by self-insured companies to cover their claims if the companies defaulted, would in fact be paid to injured workers.
Attached is a well-written summary by Dan Sovocool of the ruling by the U.S. Bankruptcy Court, District of Maine. Mr. Sovocool is the attorney for the California Self-Insurers’ Security Fund and with the law firm of Nixon Peabody in San Francisco.