Lockyer’s Executive Life Lawsuit Is Tossed Out

The California Supreme Court on Monday derailed Atty. Gen. Bill Lockyer’s attempt to seek up to $6 billion in damages for policyholders from the sale of failed insurer Executive Life Insurance Co.

The state Supreme Court in San Francisco ruled that only the California Department of Insurance has the authority to pursue claims from insolvent insurers, and that the attorney general’s office could only pursue fines of as much as $2,500 per violation.

In 2001, Lockyer filed suit against Artemis, a company controlled by French billionaire Francois Pinault, and Apollo Advisors, accusing them of unfair business practices and other claims related to the sale of Executive Life in the 1990s.

Lockyer is “out on the big bucks claims for restitution and civil damages,” said James Clark, a Los Angeles attorney who is representing Artemis.

Lockyer is evaluating the legal options, said Tom Dresslar, a spokesman for the attorney general.

In a separate Executive Life suit, after a lengthy civil trial in Los Angeles state Insurance Commissioner John Garamendi in July won a $700-million punitive damage award against Artemis, which bought part of Executive Life.

Garamendi had seized the state’s then-largest life insurer in 1991.

The Insurance Department filed its suit in 1999 alleging that French-government-controlled Credit Lyonnais, which bought the troubled insurer, had conspired with other investors to fraudulently acquire Executive Life’s multibillion-dollar portfolio of high-risk junk bonds by using a series of intermediary companies that violated state law.

Legal experts have said that Garamendi is unlikely to collect any of the $700 million in punitive damages because past case law has generally held that there must be compensatory damages if punitive damages are to be assessed.

Representatives of the Executive Life policyholders, many of whom lost hundreds of thousands of dollars from promised annuities when the insurer collapsed, declined to comment Monday.