Earlier this month, Judge Judith J. Gische of the Appellate Division of the Supreme Court of New York, First Judicial Department found that ACA Financial Guaranty Corporation, as bond insurer, must make future, post-confirmation principal and interest payments on bonds issued pre-bankruptcy by a municipal issuer despite the fact that the bonds were exchanged for new bonds and cancelled under the municipality’s chapter 9 plan.  The Court required ACA to make these payments because “neither the plan of debt adjustment nor the discharge of the bond debt in the bankruptcy proceeding changed the obligations under the parties’ contracts of insurance.”  The insurance policies at issue were governed by New York law.  This decision makes clear that monoline insurers must continue to extend coverage to bondholders after a municipal issuer files for chapter 9 and obtains a discharge of the bond debt in bankruptcy.  See Oppenheimer Amt-Free Municipals v. ACA Fin. Guar. Corp., 2013 N.Y. App. Div. LEXIS 5688 (N.Y. App. Div. 1st Dep’t Sept. 3, 2013).