Insurance Commissioner Jones Wins Decision in California Court of Appeal Case Involving Executive Life Insurance Company

News: 2011 Press Release

Insurance Commissioner Dave Jones announced today a victory for California consumers after a California state appeals court decision upheld the Commissioner's actions protecting the policyholders of failed insurer Executive Life Insurance Company (ELIC). The California Court of Appeal in San Francisco affirmed a Superior Court judge's ruling which rejected a lawsuit that sought to force the sale of a California insurance company by a French-owned company. The Commissioner refused to approve the sale because it would have diverted money out of California to the detriment of policyholders. The seller sued the Commissioner in San Francisco Superior Court and Judge Charlotte Woolard rejected the lawsuit. The Court of Appeal affirmed the trial court's ruling, and further held that the Commissioner acted properly in protecting the interests of policyholders.

The lawsuit, filed in 2010, was an attempt to force the Insurance Commissioner to approve the sale of Aurora National Life Assurance Company to Reassure America Life Insurance Company, a subsidiary of insurance giant Swiss Re. Almost all of Aurora's policyholders are former policyholders of ELIC, which became insolvent in 1991. The Commissioner is pursuing a multibillion dollar lawsuit in Federal Court against one of Aurora National's owners, the French company Artemis S.A., based on Artemis' conspiracy in connection with the liquidation of ELIC, as earlier determined by a Federal Court. Had the sale gone through, hundreds of millions of dollars potentially due to former ELIC policyholders would have been diverted to France. The Commissioner 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 Insurance Commissioner for denying the transaction.

"The decision by the California Court of Appeal firmly establishes that the Commissioner may take into account the effect of a proposed sale on policyholders," Commissioner Jones said. "This ruling is a victory for California consumers and former policyholders of Executive Life, and will keep assets of Aurora in California to protect their interests."　

The lawsuit contended that the Commissioner had to ignore the fact that the seller, upon receiving the proceeds from the sale, would move the money offshore to France, where it would be hard to reach if the Commissioner obtains a judgment against Artemis in his Federal lawsuit. The Court confirmed that the Commissioner is not required to take a blinkered view of a transaction that may harm policyholders of a California insurer.

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 Commissioner 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 2/3'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.