ALBANY, N.Y., August 15 – The Appellate Division Third Department unanimouslyupheld a lower court decision granting the superintendent of insurances requestfor all communication pertaining to United Community Insurance Companys (UCIC) involvement in the Lawrence Group insurance transactions and denying a summary judgment to Chase Manhattan Bank and other investors.

In Superintendent of Insurance of the State of New York, as liquidator of United Community Insurance Company v. Chase Manhattan Bank, Formerly known as Chase Manhattan Bank (National Association) et al., the superintendent sought the return of a $13 million portion of a payment made by the Lawrence Group to defendants upon the ground that defendants knew, or should have known, that UCIC was, or would be, rendered insolvent by the Alpha Trust transaction. He moved for disclosure of all communications with counsel pertaining to the transaction, which was opposed and a motion for summary judgment was filed.

Supreme Court granted the motion to compel, and denied the motion for summary judgment, finding numerous questions of fact.

The Lawrence Group was a New York corporationand holding company owned by Albert and Barbara Lawrence. The group, in turn,comprised the Lawrence Agency Group and the Lawrence Insurance Group, the latter including subsidiaries in the form of UCIC and what ultimately became known as United Republic Insurance.

Over a five-year period, various financial groups entered into credit and lending agreements with the Lawrence Group and its affiliates, secured by substantial consideration. Although the group made scheduled payments, it periodically was found to be in breach of certain covenants put in place to monitor its financial performance. Over time, financial difficulties ensued, and the Lawrence Group amassed a debt that grew to $27 million, recovery of which the investors found doubtful. In December 2003, all parties negotiated reducing, restructuring, and repaying the debt.

Through telephone conversations and letters, a plan developed under which the Lawrence Group would borrow $13 million from UCIC and $14 million from United Republic Insurance, with the funds placed in the Alpha Trust. The notes, in turn, were secured by stock pledges and other guarantees. The $13 million loan from UCIC was not disclosed for prior approval by the superintendent of insurance.

Due to his role in restructuring this transaction and repayment plan, Albert Lawrence was federally indicted for, among other things, the crimes of mail and wire fraud in October 1999. The superintendent then brought action to recover UCICs money.

In upholding the Supreme Court decision, Appellate Judge J. P. Crew III said that the timing and the circumstances of the repayment negotiations between the Lawrence Group and defendants, coupled with the close working relationship and information sharing between the Lawrence Group and defendants, defendants knowledge of the precarious financial state of both the Lawrence Group and UCIC, and defendants ultimate acceptance of the transfer of funds from UCIC, are more than sufficient to raise a triable issue of fact as to, among other things, whether defendants knew or should have known that UCIC was or would be rendered insolvent as a result of the Alpha Trust transaction, the adequacy of the consideration for such transaction, and whether such transaction was undertaken with an underlying intent to defraud.

Despite defendants protestations to the contrary, such issues cannotbe conclusively resolved on the record presently before us. To the extent that defendants argue that the law of New Yorkdoes not recognize a fraudulent transfer claim based upon the repayment of valid, antecedent debt to an unrelated lender, we need note only that UCIC had no antecedent debt to defendants and, therefore, the cases relied upon by defendants are inapposite.