Justice Judith Gische
In 1998 a public benefit corporation (Issuer) sold $200 million in bonds financing a South Carolina toll road's extension. ACA issued secondary market insurance policies—"wrapped" by "noncancellable" certificates of bond insurance (CBIs) governed by Insurance Law Article 69—providing that it would pay the custodian the payment due resulting from Issuer's nonpayment of its bond obligations. Issuer filed for bankruptcy in 2010. Its reorganization plan called the bonds' mandatory exchange for new bonds having a reduced principal amount and having other remedies and protections in the event of default. Rejecting its claim that cancellation of the old bonds and the issuance of new bonds after Issuer's bankruptcy relieved it of any duty to pay under the CBIs, First Department affirmed supreme court's 2012 ruling denying ACA's motion for summary judgment seeking a declaration that it was not obligated to provide coverage. Among other things, neither the restructuring plan nor Issuer's discharge of debt in bankruptcy, changed the obligations under the parties' insurance contracts. The noncancelability of ACA's polices was consistent with and integral to the singular risks that the CBIs were intended to cover, Issuer's bankruptcy or insolvency.
