HARTFORD UNDERWRITERS INSURANCE COMPANY V. UNION PLANTERS BANK, N. A. 530 U.S. 1 (2000) CASE BRIEF

HARTFORD UNDERWRITERS INSURANCE COMPANY V. UNION PLANTERS BANK, N. A.

530 U.S. 1 (2000)

NATURE OF THE CASE: Hartford (P) appealed a judgment of the Court of Appeals finding that 11 U.S.C.S. § 506(c) did not allow an administrative claimant of a bankruptcy estate to seek payment of its claim from property encumbered by a secured creditor's lien.

FACTS: Hen House Interstate, Inc. filed Chapter 11. As a Chapter 11 debtor-in-possession, Hen House retained possession of its assets and continued operating its business. Union (D) had been Hen House's primary lender. D held a security interest in essentially all of Hen House's real and personal property, securing an indebtedness of over $4 million. After filing D agreed to lend Hen House an additional $300,000 to help finance the reorganization. The court entered a financing order approving the loan agreement and authorizing Hen House to use loan proceeds and cash collateral to pay expenses, including workers' compensation expenses. Hen House then obtained workers' compensation insurance from P, which was unaware of the bankruptcy proceedings. Hen House repeatedly failed to make premium payments and P continued to provide insurance nonetheless. Reorganization failed and the court instituted Chapter 7 and appointed a trustee. Hen House owed P more than $50,000 in unpaid premiums. D learned of the proceedings after the conversion, in March 1993. P then applied for an administrative expense allowance pursuant to §503 and a charge against collateral under §506(c). The Court ruled for P and the District Court and an appeals panel affirmed. The Eighth Circuit subsequently granted en banc review and reversed, concluding that §506(c) could not be invoked by an administrative claimant. The Supreme Court granted certiorari.

ISSUE:

RULE OF LAW:

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LEGAL ANALYSIS:

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