Policyholders file lawsuit against MBIA
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- May
- 13
MBIA Inc., the Armonk-based bond insurer that suffered heavy losses related to subprime mortgage debacle, faces a lawsuit from disgruntled policyholders who allege that a company restructuring enriched management at the expense of policyholders.
The suit filed in New York State Supreme Court questions MBIA’s decision to split its bond insurance businesses. MBIA announced the split in February as a way to separate its traditional municipal bond insurance business from riskier operations that brought on the company’s huge losses related to subprime mortgages.But as a result of the restructuring, MBIA’s insurance subsidiary is “an effectively insolvent shell company” and so grossly undercapitalized that it has no means of paying existing policyholders’ future claims or writing new insurance policies, the suit alleges.
“MBIA’s decision to fraudulently strip $5 billion out of MBIA Insurance and render it effectively insolvent was a blatant attempt to enrich MBIA Inc. and its management at the expense of MBIA Insurance and its policyholders – with assets the company had no right to use in this way,” Vince DiBlasi, lead counsel for the MBIA Policyholder Group at Sullivan & Cromwell, said in a written statement. “Our lawsuit simply seeks to ensure that policyholders receive what they have paid premiums for: contractually guaranteed insurance protection.”
MBIA declined comment on the suit.
This entry was posted
on Wednesday, May 13th, 2009 at 4:30 pm by Jay Loomis.
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Category: Lawsuits
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