Kueckelhan v. Fed. Old Line Ins. Co. (Mut.) , 74 Wash.2d 304, 444 P.2d 667, 674 (1968) (reinstating an insurance commissioner as rehabilitator and noting that the commissioner is "required to follow the statutory mandates and to use reasonable discretion in the rehabilitation of a seized company, with abuse of discretion to be checked by the judiciary"); In re Ambac Assurance Corp. , 351 Wis.2d 539, 841 N.W.2d 482, 495 (App. 2013) ("When reviewing the circuit court's decision to approve the rehabilitation plan, we will uphold the determinations made by the rehabilitator unless the rehabilitator abused his or her discretion." (citations omitted)).
Ambac alleges in this action that, in issuing the policies, it relied on misrepresentations by Countrywide, and that as a result Ambac was obligated to cover substantial insurance claims that arose in the wake of the collapse of the mortgage-backed securities market in and around 2010. See Nickel v. Wells Fargo Bank, 2013 WI App 129, ¶¶2-9, 351 Wis. 2d 539, 841 N.W.2d 482. ¶3 In June 2016, this court concluded that the circuit court has personal jurisdiction over Countrywide in this action because Countrywide consented to general personal jurisdiction.
The Segregated Account entered statutory rehabilitation pursuant to Wis. Stat. §§ 645.31 -32, and rehabilitation proceedings remain ongoing. For helpful background on rehabilitation proceedings, see generally Nickel v. Wells Fargo Bank , 2013 WI App 129, ¶¶12-15, 351 Wis.2d 539, 841 N.W.2d 482.In re Rehabilitation of Segregated Account of Ambac Assurance Corp. , No. 2010CV1576 (Dane Cty. Cir. Ct.). Appeals related to the rehabilitation proceedings have generated published opinions by this court and the court of appeals.
¶40 We now address each potentially pertinent ruling made by the circuit court and explain why we conclude that Tuecke fails to show any of the following: an error in interpreting or applying relevant legal standards; a clear error in relevant fact finding; or an erroneous exercise of the court's discretion in resolving any discovery-related issue. See Hughes v. Hughes, 223 Wis.2d 111, 120, 588 N.W.2d 346 (Ct. App. 1998) (de novo review applies to the interpretation or application of a legal standard); Langlade Cnty. v. D.J.W., 2020 WI 41, ¶¶24-25, 391 Wis.2d 231, 942 N.W.2d 277 (a circuit court's findings of fact are upheld unless they are clearly erroneous); Nickel v. Wells Fargo Bank, 2013 WI.App. 129, ¶105, 351 Wis.2d 539, 841 N.W.2d 482 (circuit court rulings concerning discovery issues are generally reviewed to determine whether the court has erroneously exercised its discretion
We will affirm a circuit court's exercise of discretion as long as the court reviewed the relevant facts, applied a proper standard of law, and used a rational process to reach a reasonable conclusion. Nickel v. Wells Fargo Bank, 2013 WI App 129, ¶16, 351 Wis. 2d 539, 841 N.W.2d 482. 1. The formulation of the special verdict did not prevent the real controversy from being tried.
¶3 In 2010, in order to save Ambac from insolvency in the wake of the collapse of the mortgage-backed securities market, the Wisconsin Insurance Commissioner established a segregated account for Ambac's greatest liabilities and initiated a rehabilitation proceeding for the segregated account. See generally Nickel v. Wells Fargo Bank et al., 2013 WI App 129, ¶¶2-9, 351 Wis. 2d 359, 841 N.W.2d 482. The MHPI project's policies remained in the Ambac's general account, and thus were not directly subject to the rehabilitation plan. Id.¶4 As an additional consequence of Ambac's distress, Ambac's credit rating declined below the levels that the MHBI projects were required to maintain on their surety bonds by the MHPI projects' construction loan documents.
Id. at 45-46 & n.23 (citing, e.g., Carpenter v. Pacific Mutual Life Insurance Company, 10 Cal.2d 307, 74 P.2d 76,1, 776 (1937), affirmed sub nom. Neblett v. Carpenter, supra (observing that California insurance company in the normal conduct of its business is prohibited by the contract and due process clauses of the United States Constitution from modifying existing policies; however, when the company is the subject of a rehabilitation proceeding, the rehabilitator, may, as a valid exercise of the state’s police power, do so without offending those constitutional strictures); Kentucky Central Life Insurance Company v. Stephens, 897 S.W.2d 583, 587 (Ky. 1995) (holding that, because the state has an important and vital interest in the reorganization of a financially troubled insurer, policyholders’ contracts are "subject to a reasonable exercise of state police power" as part of the reorganization process); In re Ambac Assurance Corporation, 351 Wis.2d 539, 841 N.W.2d 482, 509 (Wis. Ct. App. 2013) ("[I]t is axiomatic that the commissioner, in the reasonable exercise of the state’s police power, may structure a rehabilitation plan that has the potential to adversely affect the interests of individual policyholders when the plan advances the broader interests of the policyholders, the creditors, and the public as a whole.")).
citing, e.g., Carpenter v. Pacific Mutual Life Insurance Company, 74 P.2d 761, 776 (Cal. 1937), affirmed sub nom. Neblett v. Carpenter, supra (observing that California insurance company in the normal conduct of its business is prohibited by the contract and due process clauses of the United States Constitution from modifying existing policies; however, when the company is the subject of a rehabilitation proceeding, the rehabilitator, may, as a valid exercise of the state's police power, do so without offending those constitutional strictures); Kentucky Central Life Insurance Company v. Stephens, 897 S.W.2d 583, 587 (Ky. 1995) (holding that, because the state has an important and vital interest in the reorganization of a financially troubled insurer, policyholders' contracts are "subject to a reasonable exercise of state police power" as part of the reorganization process); In re Ambac Assurance Corporation, 841 N.W.2d 482, 509 (Wis. Ct. App. 2013) ("[I]t is axiomatic that the commissioner, in the reasonable exercise of the state's police power, may structure a rehabilitation plan that has the potential to adversely affect the interests of individual policyholders when the plan advances the broader interests of the policyholders, the creditors, and the public as a whole.")). The Rehabilitator argues that Pennsylvania courts have likewise recognized that policyholder contracts may be restructured in a rehabilitation proceeding "so long as those modifications satisfy the governing test for impairment of contracts."
, In re Rehab. of Manhattan Re–Ins. Co., 2011 WL 4553582 (Del.Ch. Oct. 4, 2011); see also In re Ambac Assur. Corp., 351 Wis.2d 539, 841 N.W.2d. 482 (Wis.App.2013) (denying motion to intervene and holding that opportunity to object to specific aspects of the rehabilitation plan satisfied due process). Most importantly, there were strong public policy reasons justifying the Court of Chancery's refusal to delay the entry of the Rehabilitation Order while intervention was briefed.
The Wisconsin decision involved an appeal from the approval of a plan of rehabilitation for Ambac Assurance Corporation ("Ambac"). In re Ambac Assurance Corp. , 351 Wis.2d 539, 841 N.W.2d 482, 502 (App. 2013).