NEW YORK (Reuters) – A New York judge has limited the damages Assured Guaranty Corp can seek in a lawsuit accusing Credit Suisse Group AG of misrepresenting the quality of loans underlying mortgage-backed securities it insured.
The decision is likely to be cited by other lenders being sued by insurers over mortgage-backed securities they guaranteed before the housing market collapsed.
In ruling on a motion to dismiss in the Assured case, New York state Supreme Court Justice Shirley Werner Kornreich said the bond insurer could not recover the full amount of its exposure under the policies “as a result of their acceptance of premiums after their knowledge of the alleged breach.”
Assured is barred from “rescinding the policies and from obtaining the equivalent…in the form of rescissory damages”, she said in her decision filed Oct. 12.
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