Howard Delivery Service v. Zurich American Insurance Co.
Howard Delivery Service filed for bankruptcy and Zurich American Insurance Company filed for repayment of thousands of dollars of unpaid workers compensation premiums. Howard self-insured its workers with a policy from Zurich, rather than relying on the state workers compensation scheme..
Zurich sought to establish priority status as a creditor under § 504(a)(4) of the Bankruptcy Code, which provides that “claims for contribution to an employee benefit plan arising from services rendered ” are given fourth level creditor priority, claiming that the insurance premiums paid by Howard to Zurich could be characterized as a “contribution to an employee benefit plan.” The bankruptcy court denied Zurich’s motion for priority status, stating that its premiums were not “bargained for, wage-substitute-type benefits,” as required by the legislative history of § 504(a)(4). Zurich appealed the bankruptcy decision to the district court, and which also denied it priority statusl. The United States Eleventh Circuit Court of Appeals reversed. It held that the language of § 504(a)(4) is unambiguous, and that the phrases“contribution,” “employee benefit plan,” and “services rendered,” clearly encompass Zurich’s unpaid premiums. Accordingly, it rejected Howard's argument based on the legislative history of § 504(a)(4).
Question Presented:
In a bankruptcy case, is an unsecured claim for unpaid premiums owing for a debtor's statutory workers' compensation liability insurance policy entitled to
priority under Section 507(a)(4) of the Bankruptcy Code as a "contribution to an employee benefit plan arising from services rendered," as held by the 4th and 9th circuits, or is such a claim not
entitled to statutory priority, as held by the 6th, 8th and 10th circuits?
