March 08, 2012

Case Highlights 2005-2006 Term

Following are case highlights for the topic area of Bankruptcy. To access other case highlights for the 2005-2006 Term or previous terms, or to return to the main Case Highlights page, use the Topic Area menu to the right.


Howard Delivery Service, Inc. et al. v. Zurich American Insurance Co.
Docket No. 05-128
Reversed: The Fourth Circuit

Argued: March 21, 2006
Decided: June 15, 2006
For Case Analysis: See ABA Preview 314

Is an unsecured claim for unpaid premiums owing for a debtor's statutory workers' compensation liability insurance policy entitled to priority under § 507(a)(4) of the Bankruptcy Code as a "contribution to an employee benefit plan arising from services rendered"?

No. Insurance carriers' claims for unpaid workers' compensation premiums owed by an employer fall outside the priority allowed by § 507(a)(5).

From the opinion by Justice Ginsburg (joined by Chief Justice Roberts and Justices Stevens, Scalia, Thomas, and Breyer):

This case turns … on the essential character of workers' compensation regimes. Unlike pension provisions or group life, health, and disability insurance plans-negotiated or granted as pay supplements or substitutes-workers' compensation prescriptions have a dominant employer-oriented thrust: They modify, or substitute for, the common-law tort liability to which employers were exposed for work-related accidents. … Workers' compensation regimes thus provide something for employees-they assure limited fixed payments for on-the-job injuries-and something for employers-they remove the risk of large judgments and heavy costs generated by tort litigation. … [W]e find it far from clear that an employer's liability to provide workers' compensation coverage fits the § 507(a)(5) category "contributions to an employee benefit plan . . . arising from services rendered." … [W]orkers' compensation does not compensate employees for work performed, but instead, for on-the-job injuries incurred; workers' compensation regimes substitute not for wage payments, but for tort liability.

Dissenting: Justice Kennedy (joined by Justices Souter and Alito)

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