Linens Holding gains $1.24 million payment with insurance settlement

By Kali Hays

New York, Dec. 11 – Linens Holding Co. Chapter 7 trustee Charles M. Forman received approval of a settlement with Liberty Mutual Insurance Co. that includes a policy buyback worth $1.24 million, according to a Thursday order from the U.S. bankruptcy Court for the District of Delaware.

As previously reported, prior to Linens filing for bankruptcy, Liberty issued some commercial general liability insurance policies and workers’ compensation liability policies to the company.

Some open workers’ compensation claims remain within the estate, and Liberty currently holds $3.76 million for the funding of policy obligations provided by Linens, according to the motion.

Liberty has “asserted certain defenses” on the payment of the claims, and Linens filed a complaint against the insurer in 2011, seeking to recover alleged preferential transfers.

Under the settlement, Liberty will pay a total of $1.24 million to Liberty from held policy funds and release and/or waive all claims against the company.

Linens’ trustee agreed to sell Liberty all remaining general liability policies and dismiss the adversary proceeding against the insurance company.

Liberty also conditioned the agreement upon entry of an order permanently staying any action against it by holders of asset or interest claims against Linens related to the policies.

Linens, a Clifton, N.J., home furnishings specialty retailer, filed for bankruptcy on May 2, 2008. Its Chapter 7 case number is 08-10832.

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