NU Online News Service, May 4, 3:05 p.m.EDT

A group of banks contesting the split of bond-insurer MBIA intotwo companies won a round in court against the New York StateInsurance Department over the release of e-mails related to theplan.

A state appeals court has ordered the insurance department torelease to a judicial hearing officer all e-mails that weretransmitted between then-Insurance Superintendent Eric Dinallo andseveral department employees relating to MBIA.

In a statement, an attorney for the banks seeking the documentrelease—Robert J. Giuffra Jr., who is a partner at Sullivan &Cromwell LLP—says: "We're pleased that the Appellate Division hasdenied the insurance department's efforts to prevent discovery ofe-mails among senior department personnel reflecting bias,prejudgment of specific facts, or that the superintendent'sapproval was preordained or steered to an approval."

The banks contend the split of Armonk, N.Y.-based MBIA would bedetrimental to the payment of coverage for structuredfinance obligations that the company insures.

MBIA  was split into twocompanies in 2009. MBIA placed its healthy municipal-bondinsurance business in one company named National PublicFinance Guarantee Corp., while the second company,MBIA, retains the structured finance obligationexposures.

The banks have filed an Article 78 action against the departmentseeking to nullify Dinallo's order approving the split.

The department declined to comment on the court's decision.