2020-10-15_GENERAL DOCUMENTS - C1980004 ‎(2)‎

• Permit No: C1980004
• IBM Index Class Name: General Documents
• Doc Date: 10/15/2020
• Doc Name Note: Case No. 20-12043 ‎(GRH)‎ Hopedale Mining LLC
• Doc Name: Bankruptcy Notice
• From: Foley & Lardner. LLP
• To: DRMS
• Email Name: JRS
• Email Name: JDM
• Email Name: GRM
• Email Name: CMM
• Email Name: CCW
• Media Type: D
• Archive: No

Case 1:20-bk-12043 Doc 453 Filed 10/06/20 Entered 10/06/20 15:26:47 Desc Main
Document Page 2 of 9
The policy provides direct coverage to the estate. The proceeds of the policy are therefore property
of the estate. Unlike a claim under D&O insurance policies that provide a direct benefit to officers
and directors, Mr. Hughs seeks indemnification from the Debtors, who are in turn entitled to
insurance coverage for that indemnification under a liability policy. This means that to the extent
the Debtors are obligated to indemnify Mr. Hughs, then the insurance policy pays the Debtors for
those costs, not Mr. Hughs.
For this claim, the Debtors are the beneficiaries of this policy, bringing the policy and its
proceeds entirely within the section 541 definition of property of the Debtors' estates. By
attempting to obtain proceeds directly from the policy, Mr. Hughs is seeking to elevate his claim
above that of other unsecured creditors, which he cannot do. The Court should deny the Motion.
RELEVANT BACKGROUND FACTS
1. The Debtors and Mr. Hughs are beneficiaries under an Executive and Corporate
Securities Liability Insurance Policy issued by XL Professional Insurance (the "Policy"). As set
forth in the Policy, different coverage parts apply to different insureds.
2. Mr. Hughs alleges that he has a contractual and legal right to indemnification for at
least some of his costs incurred arising out of the various investigations of the Debtors and their
non -debtor affiliates. See, e.g., Doc. 429 at ¶¶ 11-14 (citing partnership agreements and by-laws).
3. Hughs concedes that his is a claim for indemnification. See id. ¶ 21 ("That demand
for advancement has matured into a demand for indemnification as Hughs has incurred
$389,271.28 in fees and expenses related to the investigations and Delaware case.")
4. To this point, the Policy specifically provides:
[w]ith respect to the Company's indemnification of its Insured
Persons, the certificate of incorporation, charger, by-laws, articles
of association, or other organizational documents of the Parent
Company, each Subsidiary and each Non -Profit Entity or Joint
Venture, will be deemed to require indemnification to the Insured
2