Patriot National filed with the U.S. Bankruptcy Court a motion to (i) compel mediation of claims against the Debtors’ directors and officers (D&O) and (ii) temporarily stay related litigation pending the outcome of mediation.
The motion explains, “The relief sought in this motion addresses the Debtors’ concern that continued prosecution of the Claims would quickly deplete the available proceeds of the D&O Policies through payment of defense costs and expose the estates to potential indemnification or estoppel risks. Such a result would not be in the best interests of the Debtors’ creditors or the investor litigants vying to recover from the same finite pool of insurance coverage, as the Non-Debtor Parties may not have sufficient resources to satisfy any judgment. By this Motion, the Debtors seek a Court-ordered mediation to seek to resolve all Claims covered by the D&O Policies at once in the best interest of all stakeholders and the estates. The Debtors have been informed that the Insurers and the Prepetition Agent support mediation of the Claims.”
In addition, “The Debtors have approximately $60 million and $70 millions of D&O insurance coverage for 2016 and 2017, respectively, and the proceeds of those policies may provide meaningful recoveries to the Debtors’ creditors and other stakeholders. On information and belief, in excess of $20 million of the proceeds of the Debtors’ prepetition D&O Policies, has already been advanced in the less than two years since the first Action was filed. There is a significant risk that the remaining proceeds will be largely, if not completely, exhausted by defense costs if an early settlement of the Claims is not reached. A successful mediation could resolve these disputes in a manner that would save the parties – and the courts – time, money and resources, while preserving the bulk of the D&O Policies’ proceeds for the benefit of the creditors in the chapter 11 cases and the plaintiffs in the Actions.” The Court scheduled a February 18, 2018 hearing on the motion.
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