Sunland trustee arranges $10 million insurance buyback to pay claims

By Kali Hays

New York, Aug. 1 – Sunland Inc.’s Chapter 7 trustee, Clark C. Coll, reached a settlement and policy buyback agreement with Great American Alliance Insurance Co. related to a pre-bankruptcy lawsuit on damages sustained from Sunland’s 2012 peanut butter recall, according to a Friday motion with the U.S. Bankruptcy Court for the District of New Mexico.

The agreement “fully and finally compromises and resolves all disputes” between the parties.

Under the settlement, Great American Alliance has agreed to pay Sunland $10.6 million and in turn, Coll will transfer all remaining insurance policies to the insurer and any related liability will be terminated.

Coll believes the settlement is necessary “and will be part of a fair, effective, efficient and timely method in which to make payments to eligible claimants,” according to the motion.

Specifically, $9 million of the settlement payment will be deposited into a separate claims fund “to be used solely for paying existing claims,” $250,000 will be put into a separate account for specific salmonella related claims, $750,000 will be put into a separate account for the payment of future claims and $600,000 will be used for the payment of administrative costs related to the payment of claims.

As previously reported, Chapter 7 trustee Coll proposed that the court allow him to negotiate the buyback agreement in lieu of releasing the automatic stay.

Sunland, a Portales, N.M., peanut butter producer, filed for bankruptcy on Oct. 9, 2013. The Chapter 7 case number is 13-13301.

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