A unanimous Appellate Division, First Department, panel ruled yesterday that two insurance companies are entitled to jury trials in lawsuits accusing Credit Suisse affiliates of fraudulently inducing them to issue policies on mortgage-backed securities, even though the policies waived the right to a jury trial. The insurers, Ambac Assurance Corp. and MBIA Insurance Corp., filed separate lawsuits in 2009 and 2010, respectively, which were consolidated because they involve similar allegations. The insurers allege Credit Suisse made false representations about the default risk of mortgage-backed securities it was underwriting.
In 2011, Manhattan Supreme Court Justice Shirley Kornreich (See Profile) struck the jury demands in the suits on the grounds that the policies waived the right to a jury trial. However, the First Department ruled yesterday that the insurers can still seek a jury trial because they are alleging they were fraudulently induced to enter into the policies in the first place. “The complaint alleges repeatedly that the insurance agreement was obtained through various types of fraud, making it clear that fraudulent inducement is plaintiff’s primary claim,” the panel wrote in both decisions. “Thus, the provision of the agreement that waives the right to trial by jury does not apply.”
