Bankruptcy

Proceeds of insurance policy - bankrupt insured against disability - policy benefits falling into bankrupt's estateCork v Rawlins: CA (Lords Justices Peter Gibson, Chadwick and Keene): 2 February 2001The defendant had two insurance policies which would pay out if he became unable to work through disability.

The defendant sustained an injury and ceased working.

He claimed under the policies and subsequently became bankrupt.The trustee in bankruptcy sought a declaration that benefits under the policies fell into his estate and were divisible between creditors.

The judge granted the declaration.

The defendant appealed on the basis that the claim to benefits was personal to him because payment was conditional on his continuing disability and so conditional on his continuing pain and suffering.Louis Doyle (instructed by Freeth Cartwright Hunt Dickins, Nottingham) for the defendant.

Stephen Davies QC (instructed by Osborne Clarke OWA, Bristol) for the trustee.Held, dismissing the appeal, that money payable under insurance policies activated when the insured could no longer work through disability were assets to which a bankrupt was contractually entitled and could not be excepted from his estate, and the bankruptcy code could not be used to shield such assets; and that, accordingly, the bankrupt's assertion that a claim to benefits payable was personal to him and as such excepted from his estate because payment was conditional on his disability and so conditional on his continuing pain and suffering, was contrary to the policy of the Insolvency Act 1986 and untenable.