Judge dismisses lawsuit tied to I.B.C. insurers
October 6, 2010
by Eric Schroeder
KANSAS CITY — U.S. District Judge Howard F. Sachs on Oct. 4 dismissed a $56 million lawsuit filed by U.S. Bank, which was a trustee for the unsecured creditors in Interstate Bakeries Corp.’s bankruptcy proceedings, against insurers of the former I.B.C. (now known as Hostess Brands, Inc.).
According to the Oct. 4 filing, claims well in excess of $100 million were asserted against Paul E. Yarick, former treasurer of I.B.C., for alleged breach of fiduciary duties. The claims against Mr. Yarick were subsequently settled for $56 million, and as part of the settlement, Mr. Yarick was promised that, upon assignment of his insurance coverage rights, he would not be pursued for payment. Mr. Yarik’s work was insured through an employment agreement with I.B.C.
In a case filed in March by U.S. Bank, Federal Insurance Co. and several other insurers named in the case argued that because Mr. Yarik did not suffer a loss based on the settlement, the insurance coverage would not allow U.S. Bank to collect the $56 million. In his most recent ruling Judge Sachs agreed.
“Because of that restriction in the agreement and ensuing judgment I conclude that Yarick has suffered no ‘loss,’ as defined in the policy, and thus there is no insurance coverage under Missouri law,” Judge Sachs said.