NC Appeals Court Upholds Asset Protection Order in Insurance Rehabilitation Contempt Case

The North Carolina Court of Appeals affirmed a Wake County order holding Greg E. Lindberg and Global Growth Holdings, LLC in civil contempt for violating a Temporary Restraining Order (TRO) related to asset management of four distressed insurance companies under rehabilitation and liquidation. These companies include Southland National Insurance Corporation (in Liquidation), Bankers Life Insurance Company, Colorado Bankers Life Insurance Company, and Southland National Reinsurance Corporation, all acquired by Lindberg in 2014. The TRO was intended to protect these insolvent insurers by restricting asset movements to prevent devaluation or dissipation. The case arose after Lindberg allegedly failed to place certain Specified Affiliated Companies (SACs) under a New Holding Company as mandated by a 2019 Memorandum of Understanding (MOU). The insurers sued for breach of contract and fraud, securing the TRO against Lindberg and related entities, which was later extended by consent. Forensic analysis revealed substantial unauthorized transfers between the SACs, Global Growth, and Lindberg’s personal entities, amounting to tens of millions of dollars, including payments for personal expenses and transfers to non-insurance companies controlled by Lindberg. Following further proceedings, the trial court modified the TRO and appointed a limited receiver to monitor compliance, uncovering additional potential violations such as a substantial equity transfer in Global Growth and payments linked to Lindberg’s personal expenses and business interests. At a 2024 show-cause hearing, testimony from company officers and forensic experts supported findings of multiple TRO breaches involving significant financial transfers. The trial court imposed civil contempt sanctions and ordered specific payments to benefit the insurers, including millions payable by both Global Growth and Lindberg. The court found that defendants had the means to purge their contempt through sale or borrowing against their economic interests, including holdings in a non-insurance company (American Academy of Professional Coders) owned via a trust structure. On appeal, the Court of Appeals upheld the contempt order, rejecting claims that defendants lacked ability to comply or that constitutional protections precluded sanction enforcement. This ruling underscores judicial scrutiny on related-party transactions in insurance rehabilitation and liquidation, emphasizing that companies and their executives must adhere strictly to asset protection orders and utilize available corporate resources to comply. The decision highlights regulatory and compliance risks associated with complex affiliate structures and reinforces courts’ willingness to enforce remedies to safeguard policyholder and creditor interests in insolvency cases.