Insurance Bankruptcy Practice Alert: Supreme Court Denies Priority Status for Unpaid Worker's Compensation Premiums
7/19/2006
In a recent decision, the U.S. Supreme Court clarified an important issue to workers' compensation insurers holding that pre-petition unpaid workers' compensation premiums are not entitled to priority status under the Bankruptcy Code. Howard Delivery Service, Inc., et. al v. Zurich American Ins. Co.. This decision forecloses any disagreement among the circuit courts that unpaid workers' compensation premiums are entitled to priority status in a bankruptcy proceeding. In light of Howard, such claims are now considered merely general unsecured claims. Had the Supreme Court afforded priority status to such claims, they would have been paid prior to the claims of general unsecured creditors.
The Supreme Court differentiated workers' compensation plans from other employee benefit plans on a number of grounds, please click here for the details of this decision.
