Los Angeles, CA asked in Bankruptcy and Construction Law for California

Q: Can an insurance still be liable to pay for damages after their client has filed for bankruptcy & license revoked?

A licensed contractor was hired to paint my house. They demolished parts, caused many expensive damages, then abandoned job. State Licensing Board investigated, agreed of damage & license was revoked. Contractor hid to not pay. I filed a claim with their insurance with 3 estimates of each damage above payments made for unfilled contract. They acknowledge

their client's damage but want to low ball or go to court. Case filed in court. Now contractor has filed for bankruptcy. The insurance company is not in bankruptcy. CAN THE CLAIM WITH THE INSURANCE COMPANY CONTINUE? (THE contractor was licensed & insured when claim was filed with contractor's insurance company)

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2 Lawyer Answers
Timothy Denison
Timothy Denison
Answered
  • Bankruptcy Lawyer
  • Louisville, KY

A: The claim against the insurance company is stayed until further order of the Court, although sounds like a fraud Cl at im may be involved snd fraud is not a chargeable in bankruptcy.

Cristina M. Lipan
Cristina M. Lipan
Answered
  • Bankruptcy Lawyer
  • Wantagh, NY

A: Whether the insurer is obligated to pay out on your claims depends on the terms of the insurance policy, but the bankruptcy itself should not affect that.

You need to retain an attorney if you don't have one (an attorney to proceed against the insurer can probably also deal with the bankruptcy issues).

You may want to have the stay lifted so you can continue against insurer. Counsel for the bankruptcy Debtor (contractor) (if chapter 11) or Trustee (if chapter 7) will usually agree to stipulate to lifting the stay to proceed against insurer only, if you agree to waive claims in the bankruptcy case. This is a decision you want to make with your attorney, and you will weigh whether you want to try to get something from the bankruptcy case or against the insurer. This analysis will depend on whether your claims are covered by the insurance policy and whether there is a possibility of recovery in the bankruptcy case (or from the Debtor if determined non-dischargeable due to fraud). You would need an attorney experienced in bankruptcy to pursue non-dischargeability of your claim against the contractor in the bankruptcy case. Generally speaking, as long as your claims are covered by insurance, it may be easier to pursue the insurer.

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