NY Insurance Dept Must Hand Over Emails On MBIA Split -Court
Katy Burne
Dow Jones Newswires
May 5, 2011
A New York appellate court on Tuesday ruled that the State Insurance Department must disclose e-mails relating to the approval of MBIA Inc.'s (MBI) restructuring in 2009 amid a legal battle between 11 banks and the monoline insurer.
The decision, which affirmed a lower court order, means the Department will have to hand over e-mails between former New York Insurance Superintendent Eric Dinallo and four senior Department officials, complying with an order issued by Judge James Yates in November 2010, which the Department had sought leave to appeal.
Now subject to review by the banks' lawyers are any e-mail messages or attachments between or among two or more of the five Department officials between Jan. 1 and Feb. 28, 2009 that included the terms "MBIA" or "transformation," according to a filing.
That time frame is linked to MBIA's application for approval of the split in late 2008 and it being granted in February 2009. It is unclear if any emails between these dates will show bias.
The banks, including Bank of America Merrill Lynch and Morgan Stanley (MS), are suing MBIA, its subsidiaries, the Department and Dinallo to reverse MBIA's split and have $5 billion of claims-paying assets returned to MBIA Insurance.
The banks contend that MBIA's split into two entities two years ago harmed them because it left MBIA's structure finance insurer effectively insolvent, and less able to pay claims on complex transactions the banks had paid MBIA to insure.
MBIA may have underestimated future losses on subprime mortgage-related securities by at least $10 billion before it restructured itself, according to an independent assessment by BlackRock Solutions filed in March with the State Supreme Court.
"We're pleased that the Appellate Division has denied the Insurance Department's efforts to prevent discovery of emails among senior Department personnel reflecting bias, prejudgment of specific facts, or that the Superintendent's approval was preordained," said Robert Giuffra, lead counsel for the banks and a partner at Sullivan & Cromwell LLP, in a statement.
Spokesmen for the Department and MBIA declined to comment.
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