5 ABR 510

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

In re: Case No. A93-00889-DMD	Chapter 7
MARTECH USA, INC.,
Debtor.
_____________________________________
KENNETH W. BATTLEY, Trustee in	Bancap No. 97-3282 Adversary No. A93-00889-198-DMD
Bankruptcy for MARTECH USA, INC.,
Plaintiff,
v. BENJAMIN C. TISDALE III, MARK GLORE; WILLIAM NICHOLSON; MU- TUAL INSURANCE COMPANY; KPMG PEAT MARWICK LLP, a Delaware limited liability partnership; LLOYDS UNDER- WRITERS; COMMERCIAL UNION AS- SURANCE COMPANY PLC; AEGON INSURANCE CO. (UK) LTD.; ZURICH REINSURANCE (UK) LTD.; CNA REIN- SURANCE OF LONDON LTD.; SPHERE DRAKE INSURANCE PLC. NO. 1 A/C; COMPAGNIE D'ASSURANCES MARI- TIMES AERIENNES ET TERRESTRES PER CAMOMILE UNDERWRITING AGENCIES LTD.; UNITED NATIONAL INSURANCE COMPANY; WILSON, SONSINI, GOODRICH and ROSATI; CHARLES E. COLE; DAVIS & DAVIS, P.C.; MARSTON & COLE, P.C.; COPE- LAND, LANDYE, BENNETT & WOLF, LLP and GROH EGGERS, LLC, Defendants.
_____________________________________

MEMORANDUM REGARDING MOTIONS TO DISMISS
PLAINTIFF'S AMENDED COMPLAINT

Kenneth Battley, the chapter 7 trustee for the debtor, Martech U.S.A., Inc. ("Martech"), brought this action seeking to obtain the proceeds of an officers and directors insurance policy as well as declaratory and injunctive relief. The defendants are some of the former officers and directors of Martech, their attorneys, KPMG Peat Marwick and the insurance companies that issued an officers and directors policy for Martech. 5 ABR 511

   All defendants except for KPMG have moved to dismiss trustee's complaint. The trustee has filed a cross-motion for a preliminary injunction. This court has jurisdiction over the controversy in accordance with 28 U.S.C. § 1334(e) and the district court's order of reference. Because the insurance proceeds have an insufficient potential impact on Martech's chapter 7 estate, the trustee's complaint will be dismissed with prejudice and his motion for a preliminary injunction will be denied.

Factual and Procedural Background
          Martech was an Anchorage based contractor that initially performed diving and marine services for oil companies. It's business expanded to include environmental contracting and U.S. government construction projects throughout the United States. Martech experienced severe financial problems in the fall of 1993 and filed for chapter 11 relief on December 19, 1993. The chapter 11 case was converted to a chapter 7 on December 21, 1994, and Kenneth Battley was appointed chapter 7 trustee.

          Martech purchased an officers and directors insurance policy from Lloyd's of London and other underwriters in 1993. The policy period ran from July 1, 1993, to July 1, 1994, and had a total liability limit of $5,000,000.00, including defense costs. Suits were initiated against the officers and directors of Martech following its bankruptcy. Attorney's fees and litigation expenses have been incurred for the defense of the officers and directors. These defense costs are deducted from the liability limits of the policy. Several piecemeal settlements have been made among some of the creditors, officers, directors and the trustee, but no comprehensive settlement has been reached with all interested parties. The cost of the settlements has been paid by Lloyd's and the other underwriters pursuant to the policy. After payment of the defense costs and the settlements, only a small portion of the original policy limit, less than $500,000.00, remains.

           The trustee and other creditors have sued KPMG Peat Marwick on a variety of grounds. That suit is now pending in United States District Court. KPMG Peat Marwick has filed a third party complaint against some of Martech's officers and directors.

           Attorneys for the underwriters and the trustee discussed disbursement of the proceeds of the policy in late 1995, and correspondence was exchanged through early 1996. The trustee took no formal action to obtain the proceeds until the filing of his initial complaint 5 ABR 512

   on October 27, 1997. That complaint was not served. An amended complaint was filed on January 7, 1998, and served, resulting in the motions to dismiss now before the court.

          The amended complaint seeks three forms of relief. First, the trustee seeks a declaratory judgment that the policy proceeds are property of the estate and that KPMG's suit against the officers and directors of Martech violates the automatic stay. Second, the trustee seeks injunctive relief against the underwriters and KPMG forbidding "further" violations of the stay. Finally, the trustee seeks to force some of the law firms representing Martech's former officers and directors to turnover any fees they have received from the underwriters. The trustee does not seek recovery of fees from firms representing officers and directors who have settled with the trustee.

Analysis
          The defendants⁽¹⁾ have submitted motions to dismiss for failure to state a claim under Fed. R. Bankr. P. 7012 and Fed. R. Civ. P. 12(b)(6). A number of matters outside the trustee's complaint have been presented to the court. They include: (1) a copy of Martech's officers and directors insurance policy;⁽²⁾ (2) state court pleadings from the officers and directors litigation;⁽³⁾ (3) correspondence among counsel for the underwriters and the trustee;⁽⁴⁾ and (4) a copy of a settlement agreement.⁽⁵⁾ None of them will be excluded by the court. The trustee has had an opportunity to submit relevant materials in response to the motions and has done so. The court will take judicial notice of the matters as requested by the underwriters and Wilson, Sonsini, Goodrich and Rosati. Because matters outside the plaintiff's amended complaint are before the court, the defendants' motions to dismiss will be treated as ones for summary judgment.⁽⁶⁾

5 ABR 513

   The material facts in this case are not in dispute. Accordingly, resolution of the motions hinges upon this court's interpretation of a question of law: Do the proceeds of the officers and directors policy issued by the underwriters have sufficient potential impact on Martech's chapter 7 bankruptcy estate to be considered property of the estate? I find that they do not.

          Under 11 U.S.C. § 541(a)(1), property of a bankruptcy estate encompasses "all legal or equitable interests of the debtor in property as of the commencement of the case." The trustee contends the debtor's insurance policy and the proceeds arising from such policy are property of the estate. A number of cases generally support his position.⁽⁷⁾

          Among these cases, Manville and Robbins form the cornerstones of the trustee's position. Manville manufactured asbestos. After its extensive use for more than a century, asbestos was found to be carcinogenic and debilitating. Manville, a profitable going concern, filed for relief under chapter 11 in the face of vast numbers of personal injury suits. Total claims against Manville exceeded its net worth of $2 billion. The bankruptcy court granted an injunction against tort claimants that prohibited them from proceeding directly against Manville's insurance companies. The district court affirmed. It cited United States v. Whiting Pools⁽⁸⁾ for the proposition that a broad range of property was to be included in the bankruptcy estate. It found that Manville's insurance constituted property of the estate under 11 U.S.C. § 541(a)(1). The tort claimants could not proceed against Manville's insurers without violating the automatic 5 ABR 514

   stay.⁽⁹⁾

           Robbins followed the Manville rationale. A.H. Robbins manufactured the Dalkon Shield from 1971 through 1974. Thousands of suits were filed against Robbins by women claiming injuries through use of the device. Robbins filed for relief under chapter 11. The bankruptcy court found that the debtor's insurance policies were property of the estate, and that actions against the debtor's insurers or its officers and employees were prohibited under 11 U.S.C. § 362(a)(3). The Fourth Circuit affirmed. As additional grounds for its ruling, it found that the debtor was entitled to injunctive relief under 11 U.S.C. § 105 and through the bankruptcy court's inherent equitable powers.⁽¹⁰⁾

           A number of decisions, led by Louisiana World Exposition ("LWE"),⁽¹¹⁾ raise questions as to the scope and validity of Manville, Robbins and their progeny.⁽¹²⁾ In LWE, the Fifth Circuit found that the chapter 11 debtor had no ownership interest in proceeds from insurance policies providing liability coverage for its corporate officers and directors. The policies provided coverage for the debtor's indemnification of officers and directors claims as 5 ABR 515

   well as for the direct coverage of the officers and directors.⁽¹³⁾ A creditors' committee sought to recover on a complaint for malfeasance against the debtor's officers and directors. The committee wanted to recover the policy proceeds which had been used to pay the legal expenses of officers and directors and to prohibit such expenditures in the future.⁽¹⁴⁾ The court found that while the debtor owned the officers and directors insurance policies, it had no ownership interest in the policy proceeds and affirmed the lower court's dismissal of the complaint.

           The Ninth Circuit position on the issues raised by Manville, Robbins and LWE is ambivalent. Initially, in Minoco Group of Companies v. First State Underwriters Agency of New England Reinsurance Corp.,⁽¹⁵⁾ the Ninth Circuit followed the Manville-Robbins rationale. After Minoco filed chapter 11 in September of 1983, its excess officers and directors insurers attempted to cancel Minoco's prepaid officers and directors policy. The Ninth Circuit found the policies to be property of the estate because "the debtor's estate is worth more with them than without them."⁽¹⁶⁾ After citing Robbins with approval, the court further stated that "[f]or the purposes of the automatic stay, we see no significant distinction between a liability policy that insures the debtor against claims by consumers and one that insures the debtor against claims by officers and directors."⁽¹⁷⁾ The court found that the attempted cancellation of the debtor's officers and directors policies violated the automatic stay of 11 U.S.C. § 362(a)(3) and therefore was void.

          In Pintlar Corp. v. Fidelity and Cas. Co. of New York,⁽¹⁸⁾ however, the Ninth Circuit found that the liability portion of an officers and directors policy was not property of the estate entitled to the protection of the automatic stay. Gulf USA and its subsidiary, Pintlar, were placed in an involuntary chapter 11 in Idaho. Gulf had insurance which would cover its officers and directors for their liability and defense costs as well as reimburse Gulf's 5 ABR 516

indemnification of its officers and directors. Gulf commenced an adversary proceeding against some of its former officers and directors on a variety of theories, including fraud and mismanagement. A creditor's trust was subsequently substituted as plaintiff in that proceeding. Gulf's insurers sued the same officers and directors in Delaware state court, seeking a declaratory judgment excluding coverage for the officers and directors. Gulf then sued its insurers in bankruptcy court alleging that the officers and directors policy was property of the estate subject to the automatic stay. The bankruptcy court and district court applied the Minoco test, finding that the estate was worth more with the policy than without it, and enjoined the state court action from proceeding. The Ninth Circuit found otherwise.

The court conceded that if the state court denied coverage of Gulf's officers and directors, the creditor's trust might have greater difficulty collecting damages from them, but noted that "[t]he trust's prospects for recovery, the directors' and officers' claims for coverage, and the Insurer's right to litigate coverage all implicate interests independent of the debtor's."⁽¹⁹⁾ The court also found that any ruling by the Delaware state court would have no res judicata effect on the debtor, although the state court judgment could have a "persuasive effect" on Gulf's coverage claims under the policy. The court concluded, however, that the potential impact of the state court action did not have "a sufficient potential impact on the value of the estate to fall under the Bankruptcy Code's stay provision."⁽²⁰⁾ The lower court decisions enjoining the insurers' Delaware declaratory judgment action were reversed.⁽²¹⁾ The court declined to adopt or reject the LWE rationale, stating:

In light of our conclusion that Minoco does not support the stay, we need not consider whether we may or should adopt the reasoning of In re Louisiana World Exposition, Inc, 832 F.2d 1391 (5th Cir.1987) (distinguishing between a policy itself, which is unquestionably property of the estate, and its proceeds, which require fact-specific analysis).⁽²²⁾

The Pintlar analysis takes a step back from Minoco's "net value to the estate" approach and focuses more on the potential impact which the policy proceeds have on the value 5 ABR 517

of the bankruptcy estate. Applying this analysis to the facts present here, I conclude that the proceeds of Martech's officers and directors policy do not have sufficient potential impact on the value of the estate to be considered property of the Martech chapter 7 estate. Unquestionably, Martech purchased the policy and was the named "assured" under the policy. Further, the chapter 7 trustee has succeeded to Martech's rights in the policy. Under the Lloyd's policy issued in this case, however, Martech has no right to the policy proceeds absent its indemnification of its officers and directors. The policy provided coverage for only two events. First, Martech's directors and officers had a right to receive "reimbursement" for any loss occasioned by their wrongful acts directly from the underwriters.⁽²³⁾ Second, Martech had a right to seek reimbursement for losses it paid arising from its directors' and officers' wrongful acts. ⁽²⁴⁾

When Martech filed for bankruptcy relief, the debtor-in-possession and later the trustee became the assured under the policy. Their legal rights in the policy are no greater than Martech's. Neither the debtor-in-possession nor the trustee has a present interest in the insurance proceeds, however. Martech has been in extreme financial difficulty throughout its bankruptcy proceedings. In the five years that have elapsed since the purchase of the policy, Martech and its chapter 7 trustee have never reimbursed officers and directors for their defense of any Martech related claims. Nor could they if they wanted to. The estate simply does not have the money. Moreover, there are millions of dollars in priority and administrative claims which supercede any claims for reimbursement from officers and directors.⁽²⁵⁾ Additionally, any 5 ABR 518

officers or directors claims would have to withstand the scrutiny of equitable subordination under 11 U.S.C. § 510(c)(1). Finally, the estate's only significant unliquidated asset is its tort claim against KPMG. Litigation of that claim has taken years. The matter is tentatively scheduled for a jury trial in September, 1999. The bankruptcy estate's legal and equitable rights in the insurance proceeds are no greater than those of the debtor.⁽²⁶⁾ At best, the debtor and the chapter 7 estate as its successor have a speculative, remote interest in the policy proceeds. These proceeds may have decreased some of the claims against the estate, but given the existing $145 million in outstanding claims, they do not have a sufficient potential impact on the value of the estate to fall under the Bankruptcy Code's stay protection.⁽²⁷⁾

Additionally, major considerations underlying Manville and Robbins do not apply to this chapter 7 case. As noted in In re Fernstrom Storage and Van Co.:

[T]he policy concerns underlying the Manville-Robins line of cases are not present here. In each of those cases, the debtor's need for relief from its tort liabilities was the motivating factor behind the reorganization. E.g., Robins, 788 F.2d at 996, Tringali, 796 F.2d at 556. As most of the cases involved unprecedented numbers of tort claims against the Debtor, there was also a need to centralize litigation in a single forum. E.g., Johns-Manville Corp. v. Asbestos Litigation Group (In re Johns-Manville Corp.), 33 B.R. 254, 264 (S.D.N.Y. 1983). Reorganization furthered this goal of ensuring an equitable distribution of limited insurance funds. Titan, 837 F.2d at 330.

A second goal of the Manville-Robins line of cases was to facilitate the debtor's swift and efficient reorganization. Given the demands of litigation, continuation of the personal injury suits threatened to create a substantial drain on the time and energy of the debtor's personnel. The services of these personnel were essential to the debtor's reorganization. The stay was only intended as a temporary measure, though, enabling the debtor to determine whether reorganization was feasible. See, e.g., Johns-Manville, 40 B.R. at 225.⁽²⁸⁾

This is not a mass tort case. Relief from tort liability was not a motivating factor behind the filing. There has been no need to centralize Martech litigation in a single forum. Any goals for a swift and efficient reorganization were abandoned years ago when the case was converted 5 ABR 519

   to chapter 7. The policies favored by the Manville and Robins decisions have no application to Martech in its current posture.

          The trustee argues that bankruptcy law policy and objectives require insurance proceeds to be included in the estate. Citing a law student note and comment from the Bankruptcy Developments Journal,⁽²⁹⁾ the trustee maintains that the bankruptcy principle of equality of distribution must be served in this case. Claimants with directors and officers claims should not receive more than other unsecured creditors. It is better to include the policy proceeds within the estate so that all creditors share equally, he concludes.

          This simplistic notion of equality of distribution is unpersuasive for several reasons. First, the express terms of Martech's insurance contract cannot be unilaterally amended to include beneficiaries who were never designated in the policy. The broad concept underlying property of the estate does not give this court the power to so alter the terms of a binding insurance contract. Second, equality of distribution is meant to preserve the principal that similarly situated creditors are treated equally. Unsecured creditors with valid officers and directors claims are not similarly situated to unsecured creditors with no officers and directors claims. Fundamentally, the trustee wants apples and oranges treated the same. The principal of equality of distribution was never meant to be applied in such a manner. Application of the trustee's policy argument to common bankruptcy situations would lead to absurd results. If, for example, a chapter 7 debtor was a named insured under an automobile liability policy, the policy and its proceeds would become property of his chapter 7 estate. A pre-petition personal injury victim would have but a general unsecured claim against the debtor. The injured party would be forced to give up the insurance proceeds to the chapter 7 estate. Administrative and priority creditors could be paid in full from the proceeds, leaving the claimant to receive only a pro-rata share of his claim, if anything, along with credit card debt and other unsecured claims. The policies underlying state liability insurance requirements would be thwarted. The trustee's policy argument is deeply flawed.

          The defendants have submitted a number of additional grounds for dismissal of the trustee's complaint. Because I have concluded that the officers and directors proceeds are not property of the chapter 7 estate, these additional grounds are moot and will not be 5 ABR 520

addressed.

Conclusion
The proceeds of Martech's officers and directors policy have an insufficent potential impact on the chapter 7 estate to be considered property of the estate. KPMG's suit against Martech's officers and directors does not violate the automatic stay and the trustee is not entitled to injunctive relief or turnover of fees. The defendants are entitled to summary judgment dismissing the trustee's complaint with prejudice. An appropriate order and judgment will be entered.

DATED: November 10, 1998.
	BY THE COURT
	DONALD MacDONALD IV
	Unites States bankruptcy Judge

1. 5 ABR 512 "Defendants" as used hereafter excludes KPMG Peat Marwick.

2. 5 ABR 512 Submitted by the underwriters, Davis and Davis and the trustee.

3. 5 ABR 512 Submitted by the underwriters and Wilson, Sonsini, Goodrich and Rosati.

4. 5 ABR 512 Submitted by the underwriters and the trustee.

5. 5 ABR 512 Submitted by Wilson, Sonsini, Goodrich and Rosati.

6. 5 ABR 512 Fed. R. Civ. P. 12(b)(6); 5A Wright and Miller, Federal Practice and Procedure: Civil 2d § 1366 (2d ed. 1990).

7. 5 ABR 513 St. Clare's Hosp. and Health Center v. Ins. Co. of N. America (In re St Clare's Hosp. and Health Center), 934 F.2d 15 (2nd Cir. 1991) (Chapter 11 debtor's liability insurance was property of the estate); Minoco Group of Companies, Ltd. v. First State Underwriters Agency of New England Reinsurance Corp. (In re Minoco Group of Companies, Ltd.), 799 F.2d 517 (9th Cir. 1986) (Prepaid officers and directors insurance was an asset of debtor's chapter 11 estate and subject to the automatic stay); A.H. Robbins Co. v. Piccinin, 788 F.2d 994 (4th Cir. 1986) (Insurance policies purchased by debtor were property of the chapter 11 estate and no Dalkon shield litigation could be brought against the debtor's insurers, officers and directors without violating the automatic stay ); In re Davis, 730 F.2d 176 (5th Cir. 1984) (Automatic stay applied to asbestos workers' suits and prevented them from proceeding against debtor's insurance companies and executives); Johns-Manville Corp. v. The Asbestos Litig. Group (In re Johns-Manville Corp.), 40 B.R. 219 (S.D.N.Y. 1984) (Manville's liability insurance was property of the estate and third party actions against its insurers were subject to the automatic stay); In re Sacred Heart Hosp. of Norristown, 182 B.R. 413 (Bankr. E.D. Penn. 1995) (Chapter 11 debtor hospital's indemnification interest in officers and directors policy proceeds was sufficient to constitute property of the estate); Celotex Corp. v. AIU Ins. Co. (Matter of Celotex Corp.), 152 B.R. 667 (Bankr. M.D. Fla. 1993) (Asbestos manufacturer's insurance policies and proceeds are property of its chapter 11 estate); Circle K Corp. v. Marks (In re Circle K Corp.), 121 B.R. 257 (Bankr. D. Ariz. 1990) (Officers and directors policies were valuable estate assets and securities fraud litigation against two former CEOs of the debtor violated the automatic stay); City Ins. Co. v. Mego Int'l, Inc. (In re Mego Int'l), 28 B.R. 324 (Bankr. S.D. N.Y. 1983) (Insurer's state court action against officers and directors of chapter 11 debtor seeking declaratory judgment as to liability under policy would have an impact on potential property of the estate and insurer is not entitled to relief from the automatic stay).

8. 5 ABR 513 462 U.S. 198 (1983).

9. 5 ABR 514 Johns-Manville Corp., 40 B.R. at 230-231.

10. 5 ABR 514 A.H. Robbins Co., 788 F.2d at 1003-1004.

11. 5 ABR 514 Louisiana World Exposition, Inc. v. Federal Ins. Co. (In re Louisiana World Exposition, Inc.), 832 F.2d 1391(5th Cir. 1987).

12. 5 ABR 514 Pintlar Corp. v. Fidelity and Casualty Co. of New York (In re Pintlar Corp.), 124 F.3d 1310 (9th Cir. 1997) (Officers and directors liability coverage does not have sufficient potential impact upon the chapter 11 estate to bar insurer's declaratory judgment suit against officers and directors of debtor in Delaware state court); Nat'l Union Fire Ins. Co. of Pittsburgh v. Titan Energy, Inc. (In re Titan Energy, Inc.), 837 F.2d 325, 329 (8th Cir. 1988) (Products liability policies found to be property of the estate but the policy proceeds do not flow into the coffers of the estate); Liberty Mut. Ins. Co. v. Official Unsecured Creditors Comm. of Spaulding Composites Co. (In re Spaulding Composites Co., Inc.), 207 B.R. 899 (B.A.P. 9th Cir. 1997) (Insurer's state court suit to obtain declaratory judgment of its liability to shareholders under comprehensive general liability proceeds did not threaten estate property or violate the stay); In re Daisy Sys. Sec. Litig., 132 B.R. 752 (N.D. Cal. 1991), (Chapter 11 trustee's motion for turnover of proceeds of officers and directors insurance policies denied as proceeds were not property of chapter 11 estate); Amatex Corp. v. Stonewall Ins. Co., 102 B.R. 411 (E.D. Pa. 1989) (Asbestos manufacturer in chapter 11 could not compel its insurers to turnover lump-sum payments to it contrary to the terms of the policies; assets protected under the automatic stay are not necessarily required to be turned over to the estate); Goldin v. Primavera Familienstiftung, Tag Assoc., Ltd. (In re Granite Partners, L.P.), 194 B.R. 318 (Bankr. S.D.N.Y. 1996) (Chapter 11 trustee's suit to enjoin investors from pursuing claims against debtor's officers and directors and their insurance was not barred by the automatic stay); In re Sfuzzi, Inc., 191 B.R. 664 (Bankr. N. D. Tex. 1996) (Liability insurance proceeds are not property of the estate because no mass torts were involved and the debtor had no right to keep the proceeds under the terms of the policy); In re Fernstrom Storage and Van Co., 100 B.R. 1017 (Bankr. N.D.Ill 1989) (Tort creditor obtained relief from stay to pursue action to recover fire loss from insurance proceeds as chapter 11 policy concerns of mass tort cases not applicable to single claimant); Cardinal Cas. Co., v. Correct Mfg. Corp. (In re Correct Mfg. Corp.), 88 B.R. 158 (Bankr. S. D. Ohio 1988) (Product liability insurer denied stay of direct actions against insurer because insurance proceeds were not property of chapter 7 bankruptcy estate).

13. 5 ABR 515 LWE, 832 F.2d at 1398.

14. 5 ABR 515 Id. at 1393.

15. 5 ABR 515 799 F.2d 517 (9th Cir. 1986).

16. 5 ABR 515 Id. at 519.

17. 5 ABR 515 Id.[emphasis in original].

18. 5 ABR 515 124 F.3d 1310 (9th Cir. 1997).

19. 5 ABR 516 Id. at 1313.

20. 5 ABR 516 Id. at 1313-1314.

21. 5 ABR 516 Id. at 1314.

22. 5 ABR 516 Id. at 1314.

23. 5 ABR 517 The full text of the Insuring Clause A of the Martech policy provides coverage:
To reimburse the Directors and Officers for Loss not exceeding the Limit of Liability in excess of the applicable Retention set forth in Item D. of the Declarations sustained by such Directors and Officers resulting from any Claim first made during the Policy Period or the Optional Extension Period, if applicable, against any of them for a Wrongful Act, except for such Loss which the Company actually pays to the Directors and Officers as indemnification, and except for such Loss which the Company is required or permitted by law to indemnify the Directors and Officers unless and to the extent that the Company is unable to make actual indemnification solely by reason of its insolvency.

24. 5 ABR 517 The full text of Insuring Clause B of the Martech policy provides coverage:

To reimburse the Company for Loss not exceeding the Limit of Liability in excess of the applicable Retention set forth in Item D. of the Declarations for which the Company shall have lawfully indemnified or is required or permitted by law to indemnify the Directors and Officers resulting from any Claim first made during the Policy Period or the Optional Extension Period, if applicable, against any of them for a Wrongful Act.

25. 5 ABR 517 Creditor National Bank of Alaska holds a secured claim for $5.8 million and is secured by almost all of the assets in this estate. The sureties hold an administrative expense claim for $250,000.00 which has yet to be paid. The priority claims which have been filed in this case exceed $1.25 million. Allowed chapter 7 administrative expenses for the trustee's professionals have already exceeded $2.5 million, and continue to accrue.

26. 5 ABR 518 Appleton v. Gagnon (In re Gagnon), 26 B.R. 926, 928 (Bankr. M.D. Pa. 1983).

27. 5 ABR 518 More than 1,600 claims have been filed in this case, for a total exceeding $145 million. The claims allowance process has just begun.

28. 5 ABR 518 Fernstrom Storage and Van Co., 100 B.R. at 1023.

29. 5 ABR 519 Ong, Directors and Officers Insurance Proceeds in Bankruptcy: The Impact on an Estate and Its Claimants, 13 Bk. Dev. J. 235 (Winter 1996).