The SCA example is being followed: the courts apply its position on the insurer’s liability for the trustee’s mistakes

Last February, the Superior Court of Arbitration was explicit that victims of ill-faith actions by a trustee were entitled to recover the amount due from the insurance company, where his liability was insured. The courts heeded the judgment and have already started implementing the example.

The judiciary of the Far-Eastern District has just considered one of such cases. It follows from the case materials (case A51-388/2012), that the liability of the trustee Dmitry Burtylev was insured by “Voenno-Strakhovaya Kompaniya (Military Insurance Company)” (MIC) OJSC. The necessity to resort to the insurance arose when the 5th Arbitration Court of Appeal ruled to exact from D.Butrylev 664000 roubles for the Inter-District Inspectorate No. 1 for Primorsky Territory of the FTS of Russia. A writ of execution was issued, and the bailiff presented it to the MIC, demanding that an insurance accident be acknowledged and payments to the tax authority be made.

The insurance company refused to fulfil the bailiff’s instruction and, in its turn, resorted to the Court of Arbitration of Primorsky Territory, alleging that it was up to the company itself to decide whether or not a case was an insurance accident and, therefore, whether or not payments on the accident were to be made (case A51-388/2012). MIC OJSC considered that the respective resolution by the bailiff erroneously replaced the debtor with the insurer and imposed a non-existent obligation on him. The MIC’s attorneys stressed in court, that the provisions of Article 16 of the APCRF and Articles 12 and 13 of the Execution Proceedings Law could have been violated.

Notwithstanding those arguments, Judge Dmitry Kuchinsky discovered nothing illegal in the bailiff’s actions and concluded that compensation for the damages caused by ill-faith actions by the trustee was an insurance accident, which did not violate the claimant’s rights and legal interests. Thus the insurance company was refused ruling the bailiff’s demand illegal. Last Monday, the case was considered by an instance of appeal. The CSK claim was rejected, and the ruling by the Court of Arbitration of Primorsky Territory was left unchanged.

One of these days, the court of appeal published the full text of its judgment. The interesting moment of it is that the court, refusing to acknowledge the illegality of the bailiff’s actions, pointed out (as did the first instance court): “the claimant, having received the bailiff’s demand, is entitled to consider it and refuse acknowledgement of the writ of execution as an insurance incident or meet the claim, at its own discretion”.

Meanwhile, the issue of distributing the payments for the damages caused by an incorrect work of a trustee has recently been considered by the superior court instance. The Superior Court of Arbitration last February reconsidered the dispute of the FTS of Russia with the same Military Insurance Company, which did not wish to pay the creditor under a bankruptcy case alleging that it was the obligation of the trustee himself (Pravo.Ru wrote of this case hearing). The SCA ruled that, if the latter avoids payments, even under the respective court decision, “when an insurance accident arises, the insurer makes the insurance payout in the amount of the losses incurred by the bankruptcy case participants and other persons”. The issue, whether an insurance company is entitled to refuse acknowledging the situation as an insurance accident, was not raised during the referral of the case to the supervision and the discussion by the Board.

But the experts believe that the lesson given by the superior instance has been learned.

Advocate Artem Kukin, Partner of the Law Firm "YUST", says: “The judgments of the first and second instances do not contradict the SCA position, since it concerns a procedural moment connected with the insurance company being legally entitled and actually able to consider the demand by the bailiff to either concur that it is an insured accident or to refuse to recognize the writ of execution thus”. He emphasizes that this case obviously deals with an insurance accident, but if the insurer still refuses to pay, the creditor – the Inter-District Inspectorate of the Federal Tax Service of Russia – may file with the courts a claim to the insurance company itself.

For more detail see here.