The top insurance regulator in the state of Massachusetts can be expected to petition the Bermuda Supreme Court in an effort to take control of controversial insurer, Electric Mutual Liability Insurance Co. (EMLICO).

Her representatives are soon expected to square off against those for the Bermuda liquidators here in Bermuda.

A US federal court judge this week indicated he would not prevent Massachusetts commissioner of insurance Linda Ruthardt from pursuing her receivership petition for EMLICO in a US state court, the Supreme Judicial Court of Massachusetts (SJC).

She has been thwarted in her attempts to seek that receivership by lawyers for EMLICO's Bermuda liquidators for months.

Counsel for the commissioner, Eric Smith, said, "The court ruling -- the important one in our view -- gives us the authority to move forward and obtain the relief from the Supreme Judicial Court that we have been asking for since January.'' Meanwhile, London reinsurers are also continuing pressure to have the Bermuda liquidation of the company stayed, in favour of a US liquidation.

Lawyer Nick Di Giovanni represents the Lloyd's market which includes 80 or more syndicates in this action. There are also some 60 reinsurance companies in London that have an interest in these treaties.

Collectively, they represent a substantial portion of reinsurance recoverables that EMLICO appeared to seek from its combined list of reinsurers.

EMLICO's sole policyholder, General Electric (GE), had estimated that they had environmental claims of some $2 billion.

Mr. Di Giovanni said, "There is a status hearing set for July 27 in federal court. But it is our view that this Massachusetts company will be liquidated in Massachusetts.'' Major reinsurers that have fought EMLICO and GE, and who have subsequently settled their dispute privately, include General Re, Allstate, Hannover Re and more recently, Kemper Insurance Cos.

The federal judge, Justice Woodlock, made his ruling from the bench Wednesday, with a written judgment to follow, maybe as early as next week.

The commissioner would then be expected to breeze through the receivership petition, even though the liquidators could still oppose her. The SJC had made the ruling that forced her to seek custody of the insolvent insurer.

Ms Ruthardt has already indicated that once armed with an appointment as receiver of EMLICO, she would come to Bermuda to seek control over EMLICO, as she is required to do by Massachusetts law.

Her resolve comes after the same SJC ruled this January that she never had any authority in 1995 to permit EMLICO's purported redomestication, or move, to Bermuda.

The court stated that in the absence of that authority, EMLICO, in effect never left the state, and remains a Massachusetts insurer.

As commissioner, Ms Ruthardt is required by law to take control of the assets of insolvent state insurers and pursue an orderly liquidation.

EMLICO declared insolvency four months after purportedly arriving in Bermuda, petitioning to be wound-up in the Bermuda Supreme Court.

It led to as yet unproven allegations from EMLICO's reinsurers that the insurer and GE, its founder, sole policyholder and creditor, had conspired to take an insolvent company out of the US to a more a favourable liquidation site in Bermuda.

EMLICO: Liquidators `pleased' The joint liquidators are David E.W. Lines and Peter C.B. Mitchell of Coopers & Lybrand Bermuda and their London partner, Christopher Hughes. They said in a prepared statement: "The Joint liquidators are pleased with the orders the court stated it will issue.

"The court indicated that it would recognise the joint liquidators rights under the Foreign Sovereign Immunities Act and indicated it would dismiss any Massachusetts receivership proceedings against the joint liquidators.

"The court indicated it would grant the joint liquidators' petition under federal bankruptcy law and would allow the removal of pending litigation in Massachusetts state courts involving EMLICO.

"The court further indicated that it would act to prevent any entity from interfering with the orderly administration of the estate by the joint liquidators.

"Finally, the court indicated that it still regarded a negotiated resolution as preferable, something the joint liquidators have consistently sought.

"The court indicated it would permit the Massachusetts commissioner to seek to establish a receivership through the Massachusetts state courts, should Massachusetts establish that there is any entity remaining in Massachusetts.'' COURTS CTS