Granite Reinsurance Company won an award for unpaid premiums from Acceptance Insurance Company (in rehabilitation) in a bankruptcy adversary proceeding. The unpaid premiums amounted to $9 million on a $15 million dollar policy that was purchased to cover Acceptance for five years. The parties had agreed to a $3 million per year premium payment schedule, due at the beginning of each of the five years covered under the reinsurance agreement. However, a dispute arose as to the calculation of pre-judgment interest on the award.

A New York appeals court recently dismissed one of two lawsuits filed against MBIA Inc. (“MBIA”) by more than a dozen major financial institutions concerning the bond insurer’s financial restructuring. The plaintiffs – owners of insurance policies issued by MBIA for structured finance products, including residential mortgage-backed securities – claimed that the bond insurer’s split into two units was intended to defraud policyholders.

On January 18, 2011, the Federal Deposit Insurance Corporation (“FDIC”) approved an interim final rule (“Interim Rule”), with request for comments, to implement certain provisions of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

This blog series has been following the continuing flow of large security breaches of Protected Health Information (“PHI”) and how affected providers and insurers have been responding to their discovery. The New York City Health and Hospitals Corporation’s North Bronx Healthcare Network (“HHC”) has recently become perhaps the largest marcher in the parade of PHI security breaches with a reported 1,700,000 persons affected.

The United States District Court for the Northern District of Illinois, applying Illinois law, has ruled that an insolvency exclusion barred coverage for claims arising out of an insurance broker’s placement of coverage with an insolvent insurance association. American Automobile Insurance Co. v. B.D. McClure & Associates, Ltd., 2011 WL 211204 (N.D. Ill. Jan. 21, 2011).

Following a $9 million judgment in its favor, Granite Re was further awarded pre- and post-judgment interest on that judgment. Granite Re filed a proof of claim in Acceptance Insurance’s bankruptcy action for the amount of $10.9 million, the balance of the premium due under a reinsurance contract plus interest. Acceptance disputed the claim, arguing it no longer needed reinsurance, and filed a separate adversary proceeding against Granite Re alleging unjust enrichment. The Eighth Circuit’s Bankruptcy Appellate Panel reversed the bankruptcy court’s ruling in favor of Acceptance.

On March 16, 2011, a Rhode Island Superior Court heard arguments on whether Rhode Island's solvent restructuring statute violates the Contracts Clause of the U.S. Constitution. The case stems from a global commutation plan developed pursuant to this statute by GTE Reinsurance Company Limited in order to settle all of its obligations under various property and casualty risks reinsured by GTE Re decades ago. Critics contend that the Rhode Island law enables policies and contracts to be modified without policyholder consent in violation of the U.S. Constitution.

On March 16, 2011, plaintiffs in ABN Amro Bank, et al. v. MBIA Inc., et al. filed their opening brief in the New York Court of Appeals. Plaintiffs are appealing the 3-to-2 decision of an intermediate appellate court dismissing their suit challenging the "fraudulent restructuring" of monoline insurer MBIA. The case, brought by a group of banks that are beneficiaries of MBIA's structured finance-related policies, claims that MBIA transferred $5 billion in assets from MBIA Insurance Corporation (a failing subsidiary) to MBIA Illinois (a stronger subsidiary).

The short answer to the title question is “no.” However, under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or the “Act”), the Federal Deposit Insurance Corporation (“FDIC”) has limited “back-up” authority to place into liquidation an insurance company that (i) meets certain criteria as respects the nature of its business and (ii) is essentially “too big to fail.” This liquidation proceeding would, however, still be under the relevant state insurance liquidation laws.1  

On March 15, 2011, the Federal Deposit Insurance Corporation (“FDIC”) issued a notice of proposed rulemaking (“NPR”) to implement certain orderly liquidation authority (“OLA”) provisions of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).