Freedom Industries’ Insurance Plan Favors Nonprofits

Freedom Industries Inc., whose leaking chemical tank made much of West Virginia’s water undrinkable early this year, filed a proposed Chapter 11 plan under which proceeds from a settlement with AIG Specialty Insurance Co. will go to nonprofit organizations benefiting the community.

Freedom has $4.5 million in cash on hand. After paying professionals and other creditors entitled to priority, it expects to have $834,000 for unsecured creditors’ claims, which may total $8.5 million. Assuming the claims don’t come in higher, unsecured creditors will get a 9.8 percent recovery, according to the disclosure.

There’s also a class action on behalf of everyone else with claims arising from the spill. Freedom has a tentative settlement for the class to receive $2.9 million from AIG. The agreement takes up almost all of the $3 million in coverage provided by the policy. Under the plan, the money from AIG won’t go to the class claimants themselves but to nonprofit organizations “for the general good of the community of Charleston.”

A bankruptcy judge must rule on the proposal.