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Case 1:20-bk-12043 Doc 453 Filed 10/06/20 Entered 10/06/20 15:26:47 Desc Main <br />Document Page 7 of 9 <br />the Debtors, not to Mr. Hughs. This principle is articulated in In re Sacred Heart Hosp. of <br />Norristown, 182 B.R. 413, 419-20 (E.D. Penn 1995) (proceeds of D&O policy was property of the <br />estate because the D&O policy provided liability coverage for the Debtor). The Fifth Circuit has <br />made it even more clear: <br />Faced with the typical situation in which a debtor corporation's <br />liability policies provide the debtor and thus the estate with direct <br />coverage against third party claims, virtually every court to have <br />considered the issue has concluded that the policies and clearly the <br />proceeds of those policies are part of the debtor's bankruptcy estate, <br />irrespective of whether those policies also provide liability coverage <br />for debtor's directors and officers. <br />In re Vitek, Inc., 51 F.3d 530, 534 (5th Cir. 1995). Here, one need not parse the language of the <br />coverage provided by Side B and D (even though the language clearly provides coverage to the <br />"company" and not to the "insured persons"). Rather, we can simply look to the coverage provided <br />by Side C, which is unambiguously a form of liability coverage exclusive to the Debtor. As the <br />Fifth Circuit stated in Vitek, `virtually every court to have considered the issue has concluded that <br />the ... proceeds of [liability] policies are part of the debtor's bankruptcy estate." Id. <br />20. Mr. Hughs might be in a very different position had the Debtor purchased "stand- <br />alone" director and officer coverage. This exact scenario is why many companies elect to provide <br />a stand-alone insurance program for their directors and officers — to wit, to avoid having to share <br />limits and to avoid having policy proceeds swept into a bankruptcy estate. The availability of these <br />stand-alone policies underscores that the intent of the Policy here is not to provide separate <br />coverage for the directors and officers. Separate coverage can be purchased — separately. Where <br />that coverage has not been purchased, the Court should not impose the consequences of that <br />decision on the unsecured creditor body, whose members reaped no benefit from the savings <br />realized by passing on more robust coverage. <br />7 <br />