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In re New England Marine Servs.

United States Bankruptcy Court for the Eastern District of New York

November 15, 1994, Decided

Case No. 192-19865-260, Chapter 11, Case No. 192-20590-260, Chapter 11



This matter comes before the Court upon orders to show cause dated January 26, 1994, brought on by New England Marine Services, Inc. ("NEMS") and Bunker Group Virginia, Inc. ("BGV") (hereinafter collectively referred to as the "Debtors") 1 [**2]  seeking preliminary injunctions enjoining Water Quality Insurance Syndicate ("WQIS") from cancelling pollution liability insurance it provides to them. The Debtors allege that the cancellation of their insurance by WQTS violates the stay imposed by section 362 of the Bankruptcy Code ("Code"). 2 After a series of hearings on the motions, the Court reserved its decision and determined that preliminary injunctions would remain in effect until it renders its ultimate decision.

I. Facts

The Debtors are related marine fuel and transport companies. Peter Frank ("Frank") is the current president of the two Debtor corporations.

Although the Debtors have restricted the scope of their fuel sale operations, they continue to own and operate numerous tugboats and barges throughout the coastal waters of the United States and Puerto Rico. Marine companies, including the Debtors, are required by federal law to maintain various types and amounts of insurance coverage. 3 In 1990, to obtain the required pollution coverage, the Debtors contacted Windward International Inc. ("Windward"), an insurance broker. Windward contacted various underwriters, and eventually arranged for WQIS, a conglomerate of numerous insurance underwriters primarily serving the marine industry, to underwrite said insurance. Through Windward, WQIS and the Debtors entered into numerous insurance agreements between 1991 and 1994.

 [**3]  Because Windward acted as their intermediary, there was no direct dealing between the Debtors and WQIS until commencement of this case. 4 All communications between WQIS and the Debtors were filtered through Windward, and all documentation received by the Debtors, except for certain quotation schedules, 5 were on Windward's letterhead.

While covered by WQIS's insurance, severe financial difficulties prompted the Debtors to file their voluntary petitions and seek relief under Chapter 11 of the Code. NEMS filed on November 20, 1992 and BGV filed on December 4th, 1992. Frank remained the principal of both debtors-in-possession pursuant to sections 1107 and 1108 of the Code.

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174 B.R. 391 *; 1994 Bankr. LEXIS 1786 **; Bankr. L. Rep. (CCH) P76,317



cancellation, termination, insurance policy, insured, renewal, broker, notice, insurance broker, postpetition, pollution, coverage, facsimile, at-will, revised, vessels, prepetition, provisions, underwrite, premiums, termination provision, insurance coverage, termination clause, constitutes, contractual, schedules, policies, enjoin

Bankruptcy Law, Bankruptcy, Estate Property, Contractual Rights, Business & Corporate Compliance, Contracts Law, Standards of Performance, Creditors & Debtors, Insurance Law, Claim, Contract & Practice Issues, Policy Cancellation, Denial & Nonrenewal, General Overview, Administrative Powers, Automatic Stay, Case Administration, Notice, Reorganizations, Debtors in Possession, Powers & Rights, Notice Requirements, Business & Corporate Law, Authority to Act, Contracts & Conveyances, Contract Formation, Insurance Company Operations, Company Representatives, Brokers, Agents, Agency Relationships, Duties & Liabilities, Knowledge & Notice, Agent Knowledge, Termination