First Circuit Confirms that Right to Payment under Insurance Policy Not Covered by Article 9 of the UCC

12/09/2015

When a company enters into a secured line of credit, it presumably expects to repay the lender on a timely basis. But what happens when an unforeseen tragic event results in economic collapse and bankruptcy for the borrower? If there are monies resulting from an insurance settlement with the borrower, the lender may wish to claim these proceeds to repay the loan. Unless the insurance proceeds are deemed “proceeds” of collateral, an interest in an insurance policy is outside the purview of Article 9 as recently reaffirmed by the First Circuit Court of Appeals.

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