The heat is on again for MBIA Inc., and it may be starting to feel like 2007 all over again. New York’s Court of Appeals yesterday reinstated a breach-of-contract lawsuit against the insurer, saying that it is not pre-empted by state insurance law.

The suit, ABN Amro Bank NV v. MBIA Inc., was brought by a dozen banks claiming that MBIA used a number of transactions coinciding with its 2009 restructuring to shift more than $5 billion from a subsidiary that issued policies to a different subsidiary.

The plaintiffs claim that, in effect, MBIA split itself into two separate businesses—one that would absorb “bad” policies on products such as mortgage-backed securities, and a “good” one that accepted policies on municipal bonds and other, safer products. Additionally, because MBIA shifted the “bad” policies from one subsidiary to the other, the suit alleges that the insurer left policyholders with no hope of ever being able to pay its claims.

The 5-2 decision by the appeals court said that potential dismissal of the suit would violate the due process rights of the banks that were policyholders, and therefore would not have a chance to challenge the approval of the insurer’s breakup by the New York insurance superintendent.

MBIA had moved to dismiss the suit back in 2009, claiming that it was a “collateral attack” on the decision of then insurance superintendent Eric Dinallo. The trial court denied the motion, but it was eventually reversed by the First Department, which agreed with the insurer’s argument.

In a separate case, ABN Amro Bank NV v. Dinallo, the banks are pursuing a separate Article 78 petition against the former insurance superintendent.