New York partner Andy Lorin was quoted in Law360 in an article titled, “Credit Suisse Ruling Arms Banks in Battle Over MBS Policies.”

A New York Supreme Court judge barred an insurance company Assured Guaranty from recovering rescissory damages in its mortgage-backed securities (MBS) suit against Credit Suisse.

Assured accused Credit Suisse of representing the loans underlying $1.8 billion in residential mortgage-backed securities as being of higher quality than they actually were. This helped Credit Suisse inflate its credit ratings and lure Assured into insuring the MBS, Assured contends.

Judge Shirley Kornreich struck down Assured's claims for rescissory damages, indemnification, attorneys' and accountants' fees, and consequential damages.

Andy, leader of the firm’s Insurance Insolvency and Financial Guaranty Insurance teams, said the decision eliminates some of the arrows in financial guaranty insurers' quiver.

"It has certainly reduced the settlement value for the financial guaranty insurer in this particular case, and maybe other cases as well," he said. "You can be certain that defendants in these cases will be waving this decision in the faces of their opposing counsel.”

While the ruling hands banks a powerful tool in their fight to block financial guaranty insurers from rescinding similar policies, Andy noted that the ruling isn't all bad news for insurers.

By preserving Assured's breach of contract claims under pooling and service agreements, Judge Kornreich paved the way for the insurer to delve into discovery.

"That is going to be considered a win for the financial guaranty insurers," Andy said. "[Assured's] basic claims for breach of contract and damages survive, and now they get to delve into Credit Suisse's documents to find what nasty surprises might lurk there."

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