* Court orders D&O insurers to cover all of MBIA's costs
* Lower court had found for both MBIA and insurers
By Ben Berkowitz
NEW YORK, July 1 A federal appeals court on
Friday ruled for bond insurer MBIA Inc (MBI.N) in a dispute
with its insurers over liability coverage for MBIA's directors
and officers in a series of investigations.
The 2nd Circuit Court of Appeals upheld a lower-court
ruling that MBIA's insurers were liable for certain of MBIA's
costs. The appellate court also overturned a ruling that denied
one of MBIA's other claims.
The claims arose from state and federal investigations into
a series of transactions entered into by MBIA as well as from
lawsuits filed against MBIA by shareholders related to some of
MBIA had sued Federal Insurance Co, a unit of Chubb Corp
(CB.N), and ACE American Insurance Co, a unit of ACE Ltd
ACE.N, after they denied claims by the bond insurer under two
$15 million insurance policies.
The lower court ruled for MBIA on its demand for coverage
of losses after investigations by federal and state regulators.
It also ruled for MBIA on its demand for coverage of costs
related to a probe by a special litigation committee.
But the lower court had also ruled for the insurers on
MBIA's demand for coverage of losses related to an independent
consultant's review. The appellate court overturned that ruling
on Friday and ordered the lower court to enter a new judgment
in MBIA's favor.
"We're pleased that the matter has been resolved in MBIA's
favor," spokesman Kevin Brown said.
ACE declined to comment, while a Chubb spokesman could not
Friday's ruling is the third this week by an appellate
court involving MBIA, once one of the world's largest bond
insurers before the financial crisis.
On Tuesday, New York's highest court reinstated a lawsuit
filed by some of the world's biggest banks against MBIA,
allowing them to pursue claims that MBIA fraudulently
restructured itself. [ID:nN1E75R0DN]
On Thursday, a New York appellate court ruled MBIA could
pursue a lawsuit accusing Bank of America's (BAC.N) Countrywide
unit of fraudulently misleading MBIA about mortgage-backed
securities it insured. [ID:nN1E75T1FU]
MBIA shares were up 3.9 percent to $9.03 in late-morning
Friday's case is MBIA Inc vs. Federal Insurance Co., et
al., United States Court of Appeals for the Second Circuit, No.
(Reporting by Ben Berkowitz; Editing by Tim Dobbyn)