NY Supreme Court Revives A Case Against MBIA

by San Antonio Attorney

The supreme court of New York revived a case filed by various huge banking institutions objecting on the bond insurer MBIA Inc’s 2009 reorganization, which the banks deemed as unfair to policyholders.

The order enables HSBC Holdings Plc, Wells Fargo & Co and Bank of America Corp to go after claims that the reorganization had wrongfully taken away $5 billion out of the company’s MBIA Insurance operations at the policyholders’ expense  .

The February 2009 reorganization was motivated by MBIA’s deficits from insurances on securities related to mortgages during the worldwide credit turmoil. This resulted in $4.6 billion of deficits in 2007 as well as 2008, and brought up doubts about the survival of MBIA.

Endorsed by New York’s insurance superintendent back then, Eric Dinallo, the bond insurer’s reorganization was created to provide protection to MBIA’s business on municipal bond from its organized finance affiliate, which experienced deficits from insuring debt on mortgage.

However, the banking institutions suggested that the reorganization would release MBIA Insurance from paying billions in claims which it is obligated to pay to its policyholders such as themselves, universities, charities pension funds, charities, along with other investors.

On January 2011, the banks’ objection on MBIA’s transfer of funds from MBIA Insurance to a different company, the National Public Finance Guarantee Corp, was rejected.

But the Court of Appeals in New York said that the state insurance law never gave Dinallo exhaustive preemptive authority to prohibit the banks in making its claims. The insurance law does not give such authority.

According to Judge Carmen Ciparick, given that the legislature really meant to give the superintendent a power to put out the rights of the owner of insurance policy to fight deceitful deals, the proof of such intention should have been evident in the law.

There are laws involved in filing a bankruptcy. Among others, a San Antonio Attorney can help you with the legal matters involve in settling your debt.

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