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SACRAMENTO, Calif.Former policyholders of the defunct Executive Life Insurance Co. will share a $295 million arbitration award stemming from the resolution of a dispute between the California Insurance Department and the National Organization of Life & Health Guaranty Assns.
The award settles Herndon, Va.-based NOLHGA's objection to Insurance Commissioner John Garamendi's decision to distribute the sumrecovered through various settlements with defendants in litigation against ELIC's purchasersto policyholders who chose to participate in the department's rehabilitation plan.
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.
Under that plan, approved by a court in December 1991, a French investment group headed by Altus Finance and Mutuelle Assurance Artisanale de France paid $3.25 billion for the bulk of Executive Life's bond portfolio and agreed to transform ELIC into Aurora National Life Assurance Co. and infuse $300 million into the new insurer.
However, the California Insurance Department later sued the buyers, charging them with fraud. In May 2005, a jury found that the buyers defrauded regulators and policyholders, significantly depleting the failed insurer's estate. The suit sought an additional $3.7 billion in damages and interest, but the jury awarded only $700 million in punitive damages.
Throughout the litigation, the department has recovered approximately $730 million from the ELIC estate through various settlements with defendants. It also is appealing a court ruling overturning the punitive damage award.
To date, approximately $356 million of the additional sums that have been recovered from ELIC's buyers have been distributed to ELIC policyholders and other claimants, according to the department.