Insurance Firm in Montana to Be Liquidated

A Montana insurance firm that wrote policies on millions of dollars of bad loans that allegedly contributed to huge losses at Bank of America has been declared insolvent and forced into liquidation by Montana authorities.

Montana Insurance Commissioner Andrea Bennett said Glacier General Assurance’s liabilities exceed its assets by at least $131 million. A Montana judge ruled last week that continued operation of the company was hazardous and ordered the firm liquidated.

Earlier this year, California officials declared the firm insolvent and forced it to stop doing business in the state.

Glacier wrote financial guarantee bonds--a promise to repay bank loans if the borrower defaults--on $89 million in real estate loans for which Bank of America served as trustee and escrow agent.

The bank lost $95 million late last year when numerous borrowers, Glacier and other insurance firms refused to make good on a large pool of mortgage loans administered by the bank.

Bank of America has since sued two firms that packaged the loans and six bank employees who it said were negligent in the affair. It was barred from suing Glacier by an earlier Montana court action placing the company under state supervision.

John Hayden, founder and former president of Glacier, said he “violently disagrees” with Montana authorities’ estimate that the firm is insolvent by $131 million. He disputed their contention that Glacier wrote millions of dollars in worthless financial guarantee bonds.

Hayden, his three children and Glacier’s chief financial officer, Mervin Selle, were removed as officers and directors of the insurance company in April. Montana insurance officials acted after learning that Hayden and the others had approved a $1.1-million dividend payment for shareholders of the insolvent firm.