The MF Global Chapter 11 trustee and an insurance subsidiary are battling customer claims to a $120 million insurance policy with the official customer advocate—the MF Global Inc. trustee — standing on the sideline according to customer advocates.
The MF Global Holdings Ltd. (MFGH) trustee and counsel for MFG Assurance responded to an objection to their previous motion asking the MF Global bankruptcy judge to approve an agreed upon stipulation and order that would allow proceeds of an MFG Assurance professional liability policy to be applied to the defense costs of MFGH officers.
Among the arguments made by the Chapter 11 trustee and MFG Assurance is that any such objection should be “asserted by the SIPA Trustee.”
A point understood well by attorneys for Sapere and related companies, one of the objectors.
Sapere Attorney John Witmeyer has noted that the only reason the $120 million policy has not been claimed by the MFGI estate is because MFGI Trustee James Giddens has not filed a claim. In its filings, the MFGI trustee has indicated that it may have a rightful claim to the MFG Assurance and other insurance policies, but has not made a formal claim.
The March 23 motion by the Chapter 11 trustee states: “the SIPA trustee of MFGI to date has not presented notice of any insurance claim for alleged losses to MFGA seeking indemnity coverage of customer losses on behalf of MFGI. As a result, MFGA to date has not made any determination as to whether any such alleged losses are in fact "covered'' under those policies.”
Following the most recent motions by the Chapter 11 trustee and MFG Assurance, Witmeyer sent a letter to Giddens stating, “Your failure to give notice of loss and to request an order, judgment and decree from the bankruptcy court that such amount is due and should be paid to the extent recovered from MFG Assurance is baffling, improper and a breach of fiduciary duty.”
The letter goes on to demand, that Giddens “present a notice of loss immediately to MFGA.”
The hearing on the motion of MFGH and MFGA as well as the objectors is scheduled for April 12.