PROVIDENCE, R.I. (WPRI) – Former Red Sox pitcher Curt Schilling and three other former 38 Studios executives will be allowed to access $2 million in insurance money that could have gone to creditors in the company's bankruptcy case to help cover defense costs in a lawsuit filed by the Rhode Island Economic Development Corporation, according to a review of court documents by WPRI.com.
U.S. Bankruptcy Court Judge Mary Walrath on Friday approved a motion made by Schilling, Jennifer MacLean, Richard Wester and Thomas Zaccagnino to advance up to $2 million from the company's directors and officers insurance policy to help with costs associated with the state's lawsuit.
38 Studios filed for bankruptcy in June less than two years after receiving a $75 million loan guarantee from the EDC. In November, the state filed suit against company executives and other architects of the deal in an attempt to recoup the roughly $100 million taxpayers may be forced to pay to cover the loan.
According to court documents, the insurance policy issued by Starr Indemnity and Liability Company provides 38 Studios' executives coverage of up to $10 million for "losses that they may suffer from ‘claims' against them for their ‘wrongful acts,'" which would include filing for bankruptcy.
In its bankruptcy filing, 38 Studios reported that it owes $150.7 million to 1,079 creditors, including $115.9 million to the state.
"Proceeds from the policy may represent a significant source of funds for the Estates, and, consequentially, a significant source of recovery for creditors," Jeoffrey Burtch, the trustee appointed to the bankruptcy case, stated.
But Burtch expressed concern about allowing Schilling, MacLean, Wester and Zaccagnino access to the entire policy.
"If given unfettered access to all of the available proceeds, the Movants may complexly eviscerate the Estate's coverage, potentially stripping the creditor body of an important source of recovery," Burtch said.
It is unclear how much the lawsuit will cost the state or 38 Studios, but lawyers have indicated that it could be at least a year before the case heads to trial. Last month, Superior Court Judge Michael Silverstein asked lawyers to file motions by Mar. 1, and scheduled a conference with the lawyers to discuss other matters for Feb. 11.
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