California Insurance Commissioner John Garamendi has announced that the Department of Insurance has won a dispute over the distribution of proceeds obtained through litigation on behalf of policyholders of the failed Executive Life Insurance Co. An arbitrator settled a dispute in December, allowing former policyholders who “opted” to participate in the approved ELIC recovery plan to share an additional $295 million.
To date, the department has collected approximately $730 million in proceeds from litigation filed by the commissioner on behalf of former ELIC policyholders against a French consortium that fraudulently acquired ELIC and its assets following the company’s 1991 failure.
The dispute over the distribution of the ELIC litigation proceeds arose when the commissioner announced plans to distribute the funds in question for the benefit of ELIC´s “opt in” policyholders. The National Organization of Life and Health Guaranty Associations opposed the distribution.
NOLHGA represents some 43 state life and health guaranty associations that, as required by state law, are responsible for covering certain policyholder losses caused by the company’s insolvency, according to CDI.
In Oct. 2005, the parties were directed to submit their dispute to binding arbitration. Retired federal Judge Charles A. Legge ruled in the DOI’s favor on Dec. 29, 2006, according to the department.
“I am gratified that this decision fully vindicates the position we have taken on behalf of the former policyholders of ELIC,” Garamendi said. “Once the ruling is fully implemented, we will have distributed a total of approximately $1.1 billion of litigation recoveries. After so many years of contested litigation and other proceedings, I am pleased to have achieved this outstanding result for policyholders.”
Approximately $356 million of the $730 million won in litigation has been distributed to ELIC policyholders and other claimants thus far.
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