30 Misc. 3d 856
N.Y. Sup. Ct.2010Background
- MBIA and GMAC entered three Insurance Agreements (2004, 2006, 2007) covering RMBS pools with 95,615 loans and ~$4,399 billion in balance.
- GMAC populated loan pools for three months after closing; MBIA reviewed loan documents and alleged GMAC failed underwriting standards.
- MBIA alleges GMAC misrepresented loan info, DTI, FICO, and CLTV, and that MBIA relied on these representations to issue policies.
- MBIA seeks repurchase of defective loans and indemnity; GMAC allegedly repurchased only a portion of nonconforming loans and MBIA paid ~$132 million in claims.
- MBIA asserts counts I (fraud), II (negligent misrepresentation), III–V breach of warranties, and VI breach of the implied covenant of good faith and fair dealing; GMAC moves to dismiss under CPLR 3211(a)(7).
- The court denies dismissal of count I, grants counts II and VI, and orders MBIA to answer remaining claims within 20 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reliance element for MBIA's fraud claim | MBIA relied on specific written reps | Sophisticated insurer should have investigated; reliance not justified | Fraud claim survives; reliance fact-intensive |
| Special relationship for negligent misrepresentation | MBIA had prior dealings and GMAC possessed superior knowledge | No special relationship; both parties sophisticated | Count II dismissed (no special relationship) |
| Good faith and fair dealing duplicative of contract | Good faith claim independent from contract | Duplicative; should be dismissed | Count VI dismissed as duplicative |
Key Cases Cited
- DDJ Mgt., LLC v. Rhone Group L.L.C., 15 N.Y.3d 147 (N.Y. 2010) (reasonable reliance is fact-intensive; written reps support fraud pleading)
- Kimmel v. Schaefer, 89 N.Y.2d 257 (N.Y. 1996) (special duty for those with unique or specialized knowledge)
- J.A.O. Acquisition Corp. v. Stavitsky, 8 N.Y.3d 144 (N.Y. 2007) (special relationship generally not arises from arm's-length sophisticated transactions)
- P.T. Bank Cent. Asia, N.Y. Branch v. ABN AMRO Bank N.V., 301 A.D.2d 373 (1st Dept 2003) (justifiable reliance questions are fact-intensive; reliance on written docs possible)
- New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308 (N.Y. 1995) (good faith implied covenant; duplicative claim guidance)