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February 07, 2013 at 07:25 AM
The comprehensive Executive Life of New York (ELNY) liquidation plan involving the capacity a majority state guaranty funds, top regulators in multiple states, millions upon millions in life insurance company coffers, and thousands of waiting policyholders has cleared a major obstacle with the dismissal of the appeal by a group of annuitants claiming the liquidation plan was unfair and they were denied due process.
The New York Supreme Court, Appellate Division, second judicial department, found in a decision dated Feb. 6, that the objecting annuitants were not denied due process, as contended, and there was no merit to the contention of plaintiffs that the Supreme Court lacked subject matter jurisdiction to include provisions which granted the receiver for ELNY judicial immunity and preliminary injunctive relief. It found that to the extent the court dismissed plaintiffs’ complaint, no appeal lies from a decision, citing the oft-used Schicchi v Green Constr. Corp., [1984]).
The appeals case had been filed by lawyer Ed Stone against the New York Department of Financial Services (DFS) after the Supreme Court, Nassau County, approved a specific liquidation plan for ELNY in a decision dated April 16, 2012, and awarded the receiver for the insolvent insurer permanent injunctive relief and judicial immunity.
The liquidation itself, to be overseen by the DFS, the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA), with funds managed in a special purpose captive domiciled in the District of Columbia, can proceed if there is no further appeal made to New York’s highest court, the Court of Appeals. There is a 30-day window to appeal after the DFS files notice, which is expected to be soon.
That means the earliest trigger date for the ELNY liquidation itself, if there is no further appeal, and when the state guaranty funds must start getting funded with life insurance company contributions, by statute, and when NOLHGA must be ready, is between March 11th and March 21, depending on the DFS filing. The significant payments expected by some insurers into the guaranty funds will be reflected in any public company’s financial statements.
At the same time, ELNY’s remaining assets would then be liquidated and transferred to a new company, already registered, called GABC, a not-for-profit captive insurer domiciled in Washington, D.C., and distributed from there.
At press time, Stone had not yet replied to NU as to whether he would appeal, but an update is expected later on this matter.
ELNY is the largest, longest-running and most contested rehabilitation and insolvency with which NOLGHA has had to deal.
At press time, Stone had not yet replied to National Underwriter as to whether he would appeal, but an update is expected later on this matter.
ELNY is the largest, longest running and most contested rehabilitation and insolvency with which NOLGHA has had to deal.
The liquidation plan, as approved, would trigger a raft of guarantee fund monies from life insurers as well as millions in auxiliary money outside the court decision voluntarily offered by many life insurance companies, according to the liquidation plan hammered out by DFS Superintendent Ben Lawsky after many years of trying to deal with the failing rehabilitation. Records show ELNY became insolvent in the early 2000s and attempts over the years to have a viable liquidation where all annuitants could be paid 100 cents on the dollar ultimately failed due to the market situation in the past decade, inaction, alleged department-wide mismanagement at the New York Liquidation Bureau and the general low interest rate environment of the past decade(s).
Back in the fall of 2011, Lawsky filed a petition with the state Supreme Court seeking to convert the rehabilitation dating from 1991 into a liquidation proceeding on the ground that ELNY was insolvent.
