Nassau County New York State Supreme Court Judge John M. Galasso has issued a decision to hold attorneys for several shortfall structured annuity settlement victims of Executive Life of New York (ELNY) in civil contempt for filing a class action lawsuit.
The judge issued his ruling on Jan. 25, 2013. The class action lawsuit was filed last November against the DFS Superintendent Benjamin Lawsky and previous ELNY receivers for breach of fiduciary duty and other complaints in the ELNY rehabilitation and insolvency case.
The ELNY case involves attempts by the shortfall annuitants to stop the terms of the proposed ELNY liquidation submitted by the New York Department of Financial Services and approved by Galasso. Lifehealthpro.com extensively investigated the saga of the troubled company and its victims last fall.
Some ELNY shortfall victims have been challenging a plan by the New York Liquidation Bureau to liquidate the company, which has been in state controlled rehabilitation since 1991. They claim it is discriminatory, favoring guaranty associations over annuitants.
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The plan is held up in the appeals process in New York, where the New York Supreme Court Appellate Division is weighing an appeal and responses. Many people say they had expected a ruling by now as Lawsky had asked for an expedited appeal.
ELNY victims from across the U.S. claim New York is overstepping its jurisdiction and authority by short-changing to the tune of $1 billion ($920 million) owed to some 1,500 victims across all 50 states.
The annuitants who will not be made whole under the liquidation plan include those who have been brain damaged, blinded, disfigured, lost limbs in accidents or lost loved ones due to wrongful death accidents, lawyers have pled.
Galasso acknowledged that the court was not empowered to dismiss the federal complaint and that the pending appeal may have an impact on the federal action, according to Beyond Structured Settlements, (BSS) a website that tracks progress in the ELNY liquidation case.
Lawsky’s office, in his capacity as receiver of ELNY, filed a Notice of Motion Jan. 18, with the United States District Court Southern District of New York to stay the ELNY class action lawsuit or, alternatively, dismiss the ELNY class action complaint in its entirety with prejudice, according to the summary. The case will continue to stretch out, though. The annuitants’ lawyers must file opposing affidavits or memoranda by Feb. 1 and Lawsky must file any replies by Feb. 8, BSS states.
The DFS did not respond to a reporter’s query today.
Money has been draining from the estate, and liabilities outstrip assets.
The DFS, the New York Liquidation Bureau and the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) — an association made up of the life and health insurance guaranty associations of all 50 states, the District of Columbia, and Puerto Rico — had developed a plan over a period of a couple of years at least, whereby estate money apportioned proportionally to annuitants, to address many but not all of the annuitants.
The U.S. life insurance industry committed to shore up the annuitants with additional funds, including a hardship fund outside the jurisdiction of proportionality constraints, but even these promised funds, contingent upon appeals court approval of the agreement, do not close the gap on the shortfall — thus the annuitants who will have their payments run out.
Edward Stone, attorney for ELNY victims stated, “We are disappointed that Judge Galasso interprets the injunctions as broader in scope than the immunity provisions contained in the various orders issued in connection with the failed rehabilitation of The Executive Life Insurance Company of New York dating back to 1991. On the other hand, we agree that Galasso is not empowered to dismiss the federal complaint and we look forward to the day when the victims of this tragedy will have a chance to shed light on what actually transpired with ELNY over the past 21 years. ”