Ruling means that the proceeds, won through the Commissioner's litigation on behalf of Executive Life policyholders, will be distributed to claimants who "opted in" to a recovery plan associated with ELIC's successor, Aurora National Life Assurance Co.
SACRAMENTO - Insurance Commissioner John Garamendi on Thursday announced that the Department of Insurance has won a dispute over the distribution of proceeds obtained through litigation on behalf of policyholders of the failed Executive Life Insurance Company (ELIC). The recent decision by an arbitrator means that former policyholders who "opted" to participate in the approved ELIC recovery plan will now share an additional $295 million.
To date, the Department has collected approximately $730 million in proceeds from litigation filed by the Commissioner on behalf of former ELIC policyholders against a French consortium that fraudulently acquired ELIC and its assets following the company's 1991 failure.
"This is yet another good decision for the policyholders of ELIC," said Commissioner Garamendi. "I have maintained since the beginning that ELIC's policyholders should benefit directly from these recoveries."
The dispute over the distribution of the ELIC litigation proceeds arose when the Commissioner announced his plans to distribute the funds in question for the benefit of ELICīs "opt in" policyholders. The National Organization of Life and Health Guaranty Associations (NOLHGA) opposed his decision. 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.
In October 2005, the parties were directed to submit their dispute to binding arbitration. Retired federal Judge Charles A. Legge subsequently ruled in the Department's favor on December 29, 2006. As a result of his ruling, ELIC's former policyholders who opted in with Aurora will now recover approximately $295 million more than they would have had NOLHGA prevailed.
"I am gratified that this decision fully vindicates the position we have taken on behalf of the former policyholders of ELIC," said Commissioner Garamendi. "Once the ruling is fully implemented, we will have distributed a total of approximately $1.1 billion of litigation recoveries. After so many years of contested litigation and other proceedings, I am pleased to have achieved this outstanding result for policyholders."
To date, approximately $356 million of the $730 million won in litigation has been distributed to ELIC policyholders and other claimants.