Panel Holds Insurer to Higher Proof Standard in Fraud Suit
An insurer who underwrote mortgage-backed securities that failed during the 2008 housing crisis must prove all the elements of common-law fraud in its suit against Countrywide Home Loans, a Manhattan appeals court has ruled. "There is no merit to Ambac's contention that Insurance Law §3105 dispenses with the common-law requirement of proving justifiable reliance and loss causation," Justice Richter wrote for the panel.
May 16, 2017 at 06:01 PM
4 minute read
An insurer who underwrote mortgage-backed securities that failed during the 2008 housing crisis must prove all the elements of common-law fraud in its suit against Countrywide Home Loans, a Manhattan appeals court has ruled.
Ambac Assurance Corp., a financial guaranty insurer, sued Countrywide in 2010 after underwriting 17 residential mortgage-backed securitizations. But Ambac may not point to New York Insurance Law §3105 as a reason for bypassing the need to prove certain fraud elements, an Appellate Division, First Department, panel said Tuesday.
Moreover, the statute, which addresses material misrepresentations in insurance contracts, cannot be used by Ambac as an affirmative basis for recovering money damages, Justice Rosalyn Richter wrote for the panel.
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