Appeals Court Rejects Bid to Halt Sale of Failed Insurer
LOS ANGELES (AP) _ A state plan to revive Executive Life Insurance Co. by turning it over to French investors passed a giant legal hurdle as a judge rejected attacks by dissident bondholders.
The California Court of Appeal on Tuesday rejected bids by two groups to extend a temporary stay of the plan and to speed up a pending hearing on their challenges.
Superior Court Judge Kurt Lewin gave final approval to the plan earlier this month, but stayed his ruling for 19 days to allow challenges. That time period was to expire late today.
Opponents still could seek a stay from the California Supreme Court.
Robert Wallan, an attorney for the bondholders, said Tuesday that his clients had not yet decided whether to seek the stay, which would block the takeover while formal challenges drag on.
″We are gratified that the court has pushed aside this latest attempt to block our rehabilitation plan,″ state Insurance Commissioner John Garamendi said in a statement.
″This is a powerful vote of confidence in the work we have done to make this plan fair to all policyholders,″ Garamendi said.
The seizure of Executive Life in April 1991 by state regulators was one of the nation’s largest insurance failures.
Regulators took the move after the company’s large junk bond holdings plummeted in value and it faced a run by customers wishing to cash in their policies.
After much controversy, the state accepted a plan to turn over Executive Life’s assets to Mutuelle Assurance Artisanale de France.
The firm agreed to assume about $7 billion in assets and to put about $300 million into Executive Life, operating it under the name Aurora National Life Insurance Co.
Garamendi has maintained that the takeover plan will provide full value on policies for 92 percent of policyholders.
But dissidents, especially those with policies of $100,000 or more, fear they will receive far less than 100 percent of their investment values.
Vince and Sue Watson of Phoenix, Ariz., said they depend on an Executive Life annuity to care for their daughter, Katie. The 13-year-old has brain damage and is confined to a bed.
″If the deal went through tomorrow, we’d have to walk away from the house and give it back to the bank,″ Mrs. Watson said.
″We are very pleased″ with the ruling, Kenneth R. Heitz, an attorney for Aurora, said in a statement. ″This will enable us to move quickly toward a closing of this transaction, and to begin bringing to Executive Life policyholders their long-awaited benefits.″