New York's highest court was asked by Bank of America Corp., UBS AG and other institutions to reinstate their lawsuit claiming that bond insurer MBIA Inc.'s 2009 restructuring was intended to defraud policyholders.

A lower-court decision throwing out the lawsuit improperly blocked claims the banks could bring as creditors, their lawyer told the New York State Court of Appeals at oral arguments yesterday in Albany.

Eric Dinallo, the state's former insurance superintendent, approved the split in 2009, allowing Armonk, New York-based MBIA to move its guarantees on state and municipal bonds out of the unit that insured some of Wall Street's riskiest mortgage debt. Robert Giuffra Jr., lead counsel for the banks, called the action unprecedented.