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.

The superintendent also sought approval of an agreement of restructuring in connection with the liquidation of ELNY pursuant to which ELNY’s assets were to be distributed on a pro rata basis to payees of ELNY annuities, and 40 State Insurance Guaranty (SIG) association members of the NOLHGA were to contribute funds toward the satisfaction of ELNY’s obligations to its annuity payees, up to the statutory coverage caps applicable to them.

A group of major U.S. life insurers led by MetLife, New York Life Insurance Company, and Prudential Insurance Company of America  are also supporting the state guaranty associations beyond the amounts that they are statutorily required to provide, and a consortium of life insurance companies voluntarily agreed to provide certain guarantees of policyholder payments, the so-called $100 million hardship fund, to be administered by JAMS, the largest private alternative dispute resolution provider in the world. For more on the hardship fund, see: www.elnyhardshipfund.com.

That’s because, even with the liquidation  agreement, which provides more coverage of benefits to payees of ELNY annuities than would have been afforded by a straight statutory liquidation proceeding, approximately 15 percent of payees or some 1,500 people, are projected to face a reduction in benefits pursuant to the agreement, some by significant percentages.

These annuitants suffer difficult, sometimes painful and disfiguring medical circumstances as the annuities were provided to them as structured settlements awarded after severe and/or disabling accidents many years ago. For example, one annuitant who faces a shortfall and could appeal to the hardship fund is Jim Dziak, who has been paralyzed from the chest down since 1985, and depends on his wife Diane to help him dress, eat, move about the house, transfer from bed to recliner to wheelchair.

Shortfall victims have also sued in civil court and a class action lawsuit was filed last November against the DFS. 

However, Nassau County New York State Supreme Court Judge John M. Galasso, who approved the original liquidation plan, issued a decision on Jan. 25 to hold attorneys, including Stone, for several shortfall structured annuity settlement victims in civil contempt . The class action lawsuit has since been withdrawn by Stone, without prejudice, so he can refile it after fighting the contempt charges.

Parties are withholding comment at this time, but Lawsky early on said it was important to annuitants to get the liquidation plan started as soon as possible because as long as they are continued to be paid 100 cents on the dollar out of the insolvent company’s estates, more money is eroding for all.

For extensive National Underwriter Life & Health ELNY coverage, see:

The complete ELNY saga

The ELNY outrage continues

ELNY shortfall annuitants’ counsel held in contempt

The aborted New York Liquidation Bureau investigation