[1]     

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 1996

, [5]     

Decided June 2, 1997

, [6]      IN RE: JEFFREY E. LAVIGNE, DOING BUSINESS AS LASER MEDICAL ASSOCIATES OF NY, " />

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In Re Lavigne, 114 F.3D 379 (2d Cir. 06/02/1997)

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 1996

No. 1141

Docket No. 96-5104

114 F.3d 379, 1997.C02.0000233 <http://www.versuslaw.com>

Decided June 2, 1997

IN RE: JEFFREY E. LAVIGNE, DOING BUSINESS AS LASER MEDICAL ASSOCIATES OF NY,

Before: VAN GRAAFEILAND, MESKILL and KEARSE, Circuit Judges.

[8]    

Argued February 24, 1997

[9]    

Debtor.

MEDICAL MALPRACTICE INSURANCE ASSOCIATION,

Plaintiff-Appellant, v.

HAL M. HIRSCH, as Trustee of the Estate of Jeffrey E. Lavigne, d/b/a Laser Medical Associates of NY,

Defendant-Appellee.

Appeal from a final judgment of the United States District Court for the Southern District of New York, Duffy, J., affirming an order of the bankruptcy court. See In re Lavigne, 199 B.R. 88 (S.D.N.Y. 1996). The United States Bankruptcy Court for the Southern District of New York, Lifland, C.B.J., held that Medical Malpractice Insurance Association must allow the Chapter 7 Trustee to purchase extended medical malpractice insurance coverage (tail coverage) for the estate. See In re Lavigne, 183 B.R. 65 (Bkrtcy. S.D.N.Y. 1995).

Affirmed.

MESKILL, Circuit Judge:

Appeal from a final judgment of the United States District Court for the Southern District of New York, Duffy, J., affirming an order of the bankruptcy court. See In re Lavigne, 199 B.R. 88 (S.D.N.Y. 1996). The United States Bankruptcy Court for the Southern District of New York, Lifland, C.B.J., held that Medical Malpractice Insurance Association (MMIA) must allow the Chapter 7 Trustee to purchase extended medical malpractice insurance coverage (tail coverage) for the estate of the bankrupt, Jeffrey E. Lavigne. See In re Lavigne, 183 B.R. 65 (Bkrtcy. S.D.N.Y. 1995). MMIA brought an adversary proceeding in the United States Bankruptcy Court seeking a declaratory judgment that the option to purchase tail coverage expired both contractually and statutorily before the Chapter 7 Trustee attempted to exercise the option on behalf of the estate. The policy was cancelled by the debtor-in-possession before his bankruptcy case was converted from Chapter 11 to Chapter 7 of the United States Bankruptcy Code (Bankruptcy Code). The Trustee filed a cross-motion seeking to establish his right to purchase the extended coverage under the terms of the policy. In its decision on cross-motions for summary judgment, the United States Bankruptcy Court denied MMIA's motion and granted the Trustee's cross-motion.

The bankruptcy court held that the Chapter 11 debtor-in-possession's cancellation of the policy was use of estate property beyond the ordinary course of business, which required notice and a hearing under 11 U.S.C. Section(s) 363(b)(1). In re Lavigne, 183 B.R. at 70-71. Since the debtor-in-possession did not provide notice, the bankruptcy court determined that the cancellation was ineffective and the policy remained in effect when the case was converted from Chapter 11 to Chapter 7. Id. at 71. The bankruptcy court further held that because the Trustee did not assume the policy within sixty days of conversion to Chapter 7, the policy was deemed rejected under 11 U.S.C. Section(s) 365(d). Id. at 72-73. The court then held that the deemed rejection cancelled the existing coverage under the policy and triggered the policy's sixty day automatic extended reporting period and option to purchase additional tail coverage. Id. The court concluded that the Trustee had timely exercised the option to purchase the tail coverage. Id. at 73. MMIA was directed to notify the Trustee of the premium amount due for the tail coverage and to accept the Trustee's tender of premium payment. Id.

MMIA filed an appeal of the bankruptcy court's decision in the district court, and the judgment was stayed pending the appeal. The district court affirmed the judgment of the bankruptcy court. In re Lavigne, 199 B.R. 88. MMIA appeals the judgment of the district court, and for the following reasons, we affirm.

BACKGROUND

MMIA, a non-profit, unincorporated underwriting association, was established by the New York Legislature in 1975 to provide professional liability insurance to all medical practitioners licensed in New York. MMIA was created to cure "the lack of adequate medical malpractice insurance at reasonable rates, and . . . to assure the prompt and fair disposition of medical malpractice claims." Bleiler v. Bodnar


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