First Circuit Raises Troubling Questions

The recently published First Circuit opinion in Rosciti v. Insurance Company of the State of Pennsylvania, 659 F 3d 92 (1st Cir. 2011) presents an increasingly common interplay between two somewhat different and often conflicting areas of law ' insurance coverage and bankruptcy. The conflict arises when the insured has a large self-insured retention or deductible that it is obligated to pay before the insurance coverage is triggered, but prior to the entry of a judgment or settlement the insured files bankruptcy and cannot pay that obligation. When the insured/debtor has a covered claim against it, the plaintiff and the insured want the insurer to provide coverage, and the insurer's position is that it has no duty to do so unless and until the insured satisfies its initial payment obligations.