California Insurance Commissioner Steve Poizner is considering a recent court decision a victory for consumers, as a lawsuit that attempted to stop the Commissioner from protecting Californians in connection with the Executive Life Insurance Co. was dismissed by the Court.
Last year, the Commissioner denied a request for permission to buy a California insurance company from a foreign company whose owner is the defendant in a multi-billion dollar lawsuit brought by Commissioner Poizner. The sale would have siphoned money out of the United States while a federal court is in the process of determining how much that owner, French company Artemis S.A., ought to pay in compensation for previous fraud, according to the Commissioner. The proposed seller in the transaction, Artemis subsidiary Aurora S.A., subsequently sued the Commissioner for denying the transaction. A court rejected that lawsuit.
“It’s my job to protect policyholders, and when I saw the harm this transaction could cause to former Executive Life Insurance Co. policyholders, I refused to allow it,” said Commissioner Poizner.
San Francisco Superior Court Judge Charlotte Woolard rejected the lawsuit against Insurance Commissioner Steve Poizner, ruling that Commissioner Poizner acted properly when he denied approval of a sale transaction that had the potential to cause harm to former policyholders of Executive Life Insurance Co. The suit is part of the on-going fallout resulting from the failure of Executive Life in 1991 and the massive fraud that was committed by French companies and companies owned by the French government in the subsequent insolvency proceeding.
The lawsuit concerned an attempt by Reassure America Life Insurance Co., a subsidiary of insurance giant Swiss Re, to purchase Aurora National Life Assurance Co. Aurora National is the life insurance company that was set up in 1992 to take over insurance policies from the insolvent Executive Life. When it was established in 1992, Aurora National was purportedly owned by a consortium of French and Swiss companies. In 1999, the Commissioner learned that the ownership of Aurora National was a fraud and the true owner was a French government-owned bank, in violation of California and federal law. The Commissioner sued in federal court in Los Angeles and recovered more than $700 million to date for former Executive Life policyholders. The lawsuit is still pending against one of the defendants, French company Artemis S.A.
While the Commissioner’s fraud lawsuit is pending against Artemis, Reassure America filed for permission to buy Aurora National from Aurora S.A. The timing of the sale would get Artemis’s share of the sale money to France, out of the reach of the Commissioner before he could obtain a judgment against Artemis in federal court. Artemis’ share of the sale will be paid to former Executive Life policyholders if the Commissioner wins his suit against Artemis.
The Commissioner denied the application on the grounds that the sale would harm former Executive Life policyholders and Reassure America demonstrated a lack of integrity in attempting to conclude the sale now, when it knew that harm would occur to its own policyholders. Judge Woolard agreed, ruling that it was not an abuse of discretion for the Commissioner to consider the interests of Executive Life policyholders in his decision.