Industry News
January 19, 2010
Creditors’ Rights Affected by Bankruptcy Judge
A landmark Bankruptcy Court case was recently decided in Florida’s Southern District. In an unprecedented ruling the Court set aside the lenders’ security for over $600 million in loans and ordered disgorgement of over $400 million from a prior lender. Given that California permits title insurers to offer endorsements for creditors’ rights coverage, the outcome of this case is particularly relevant to underwriting such coverage. If upheld, the Court’s ruling could profoundly impact risk assessments when requests are made to eliminate creditors’ rights exclusions or provide affirmative endorsements. The case serves as a cautionary tale in underwriting complex transactions, especially where there are “upstream” financings. An article about the case entitled "The TOUSA, Inc. Bankruptcy Decision: Anatomy and Implications of a Landmark Creditor's Rights Case" (PDF) has been prepared for the CLTA by Arthur Coon and Kristin Peer of the law firm of Miller Starr Regalia.
