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A contract that terminates before bankruptcy is no longer executory. The determination of whether
an event caused termination of a contract or lease is normally made under state law. However, the Fifth Circuit held that where the event causing termination was precipitated by the non-debtor party, the contract did not automatically terminate and that the creditor was obliged to place the debtor in default and seek judicial dissolution of the contract in order to avoid it becoming an executory contract in bankruptcy. Where the creditor had purchased a hospital out of foreclosure, the creditor could not say that its own act (the purchase) caused a pharmacy agreement with the eventual debtor to be terminated solely because of the foreclosure (unconsented transfer). Rather, the creditor had to undertake an additional affirmative act in order to terminate the pharmacy agreement, which had not occurred before the bankruptcy filing. Thus, the agreement was still executory upon the bankruptcy filing.Courts differ over whether insurance policies are executory contracts or not. In one case, the insurer provided coverage for a period, and had a continuing duty of defense and indemnification after expiration of the coverage, and the debtor had an obligation to pay retroactive premiums. The policy explicitly provided that it could not be terminated in the event of bankruptcy and apparently did not provide a termination remedy for failure to pay retroactive premiums. The debtor filed a bankruptcy case and confirmed a plan of reorganization. After plan confirmation and debtor's failure to pay retroactive premiums, the insurer sought a determination that the policy was an executory contract that had not been assumed in the bankruptcy case, and accordingly was deemed rejected. The district court held that the insurance policy was not an executory contract where the coverage period had expired before the bankruptcy filing, because the bankruptcy filing would not terminate the duty of defense or indemnification, and the policy apparently did not provide for
