A New York appeals court dismissed a lawsuit against bond insurer MBIA brought by twenty of the world's largest financial institutions, including Bank of America, Citigroup, and JPMorgan Chase. The lawsuit claimed that the 2009 split of MBIA amounted to a fraudulent conveyance.
The Appellate Division, First Department in Manhattan granted MBIA's motion to dismiss the lawsuit. A trial court had denied MBIA's dismissal motion. The Appellate Division posted the decision on its website.
In 2009, the insurance regulator for New York State approved a plan that split MBIA into two companies, dividing its relatively healthy municipal insurance business from its troubled structured products insurance business which suffered major losses because of guarantees on ABS and MBS.
The banks had argued that the split favored muni-insurance policy holders over other policy holders and left the structured products division undercapitalized.
