Quality, Not Quantity: The Implications of Redefining Insurance Neutrality in In re Global Industrial Technologies, Inc.

Abstract

On May 4, 2011, in In re Global Industrial Technologies, Inc., the U.S. Court of Appeals for the Third Circuit held that non-creditor insurance companies had standing to challenge a debtor’s Chapter 11 plan of reorganization. In so holding, the court redefined the concept of insurance neutrality. Whereas typically the court examines the text of a plan to determine its effects on an insurer’s rights, Global Industrial Technologies suggests that insurance neutrality in a mass-tort liability context depends on any post-petition increase in claims asserted. This Comment argues (1) that the new quantitative measure adopted by the court is an ineffective measure of insurance neutrality and (2) that the court should not rely on a third party to protect the integrity of the bankruptcy process, but should assume that responsibility itself through its sua sponte right to intervene.