N.Y. Court Rules Insurance Dept. Must Disclose MBIA E-Mails

NEW YORK - The New York State appeals court has ruled that the New York Insurance Department must hand over e-mails and documents regarding the restructuring of bond insurer MBIA Insurance Corp.

Associate Justice Leland DeGrasse wrote in a decision announced Tuesday that the department could not appeal a New York State Supreme Court order to produce the e-mails as potential evidence in a lawsuit brought by a group of MBIA policyholders.

The NYID had sought to appeal a November 2010 ruling by Justice James Yates that said it must turn over e-mails between former NYID superintendent Eric Dinallo and four senior officials. It must now comply with the discovery order. The order requires the department to submit all emails between Jan 1, 2009 and Feb 28, 2009 that include the terms “MBIA” or “transformation” and were sent between Dinallo and the four other senior members. A judicial hearing officer will then review the emails and determine if any show bias in NYID’s decision to allow MBIA to split its insurance subsidiary into two entities. The split resulted in one entity comprising its municipal bond policies and the other its riskier policies, such as mortgage-backed securities. NYID maintains that “zero” biased emails exist, according to court documents.

Spokesmen for both MBIA and the NYID declined to comment.

Robert Giuffra, lead counsel for the policyholders and a partner at Sullivan & Cromwell LLP, said: “We’re pleased that the appellate division has denied the Insurance Department’s efforts to prevent discovery of e-mails among senior department personnel reflecting bias, prejudgment of specific facts, or that the superintendent’s approval was preordained or steered to an approval.”

MBIA stock fell 2.21% in early trading Tuesday and is down 7.33% in the last five sessions.