A California state appeals court has upheld a state regulators’ refusal to approve the sale of a California insurance company to a French-owned company.
The decision upheld Insurance Commissioner Dave Jones’ actions on behalf of the policyholders of failed insurer Executive Life Insurance Co. (ELIC).
The lawsuit, filed in 2010, was an attempt to force the commissioner to approve the sale of Aurora National Life Assurance Co. to Reassure America Life Insurance Co., a subsidiary of insurance giant Swiss Re.
The California Court of Appeal in San Francisco affirmed the Superior Court judge’s ruling which rejected the lawsuit that sought to force the sale.
Jones had refused to approve the sale because he said it would have diverted money out of California to the detriment of policyholders. The seller sued in San Francisco Superior Court and Judge Charlotte Woolard rejected the lawsuit.
Almost all of Aurora’s policyholders are former policyholders of ELIC, which became insolvent in 1991. The commissioner is pursuing a multi-billion dollar lawsuit in federal court against one of Aurora National’s owners, the French company Artemis S.A., based on Artemis’ role in connection with the liquidation of ELIC. Had the sale gone through, hundreds of millions of dollars potentially due to former ELIC policyholders would have been diverted to France, according to Jones.
Jones refused to approve the sale on the grounds that by pursuing the sale when it did, the potential buyer disregarded the interests of the Aurora policyholders. The proposed seller in the transaction, an Artemis subsidiary, sued the commissioner for denying the transaction.
The commissioner’s federal lawsuit is part of the ongoing fallout from the failure of ELIC in 1991 and the fraud that was committed by French companies and companies owned by the French government in the subsequent insolvency proceeding. The state has recovered approximately $700 million to date from those companies for former ELIC policyholders.
The federal lawsuit is against Artemis S.A, whose subsidiary owns two-third’s of Aurora National. The subsidiary tried to sell Aurora National now, so that it could transmit the sale proceeds to Artemis before the Federal lawsuit is resolved.
Source: California Department of Insurance.
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