This case arises out of the “Portfolio Management Program” (”PMP”) developed by a Colorado company (the “Company”) involving sub-prime automobile loans. The PMP was designed to provide insurance to lenders for borrowers’ defaults on such loans originated and serviced by the Company. The Company arranged for insurers to provide default protection insurance (“DPI”) to lenders, which protected lenders from deficiency loan balance losses resulting from a repossessed motor vehicle.
In 2002, the Company began to take steps to replace the insurer providing DPI coverage. In October 2002, the Company initiated negotiations with Plaintiff, which sought guidance from the Superintendent of the State of New York Insurance Department (“NYID”) regarding the nature of the DPI insurance. Plaintiff asked the NYID whether the proposed insurance policy would constitute residual value insurance or financial guaranty insurance, because Plaintiff was not licensed to write financial guaranty insurance, nor could it write such coverage as a multi-line property casualty insurer. The NYID concluded that DPI coverage, absent a bankruptcy order, did not constitute financial guaranty insurance, and Plaintiff was permitted to write such coverage.
The parties entered into a Program Administrator Agreement (“PAA”), which set forth the rights and obligations of the parties in connection with the underwriting and servicing of sub-prime loans and the DPI policy. Pursuant to the PAA, a third-party reinsurer (“Reinsurer”) provided coverage for losses incurred by Plaintiff in excess of a specified amount that arose under the DPI Policy. Certain Defendants executed guaranties in favor of Plaintiff securing the obligations of the Reinsurer under the reinsurance agreement (“Guaranties”).
On February 7, 2007, Plaintiff filed its complaint in this matter asserting that each defendant breached its obligations under the Guaranties. Plaintiff moved for partial summary judgment seeking an order that the Defendants were required to fulfill an obligation incurred by the Reinsurer to post $70 million in security in an arbitration and ordering Defendants to post the security. The Court granted Plaintiff’s motion. On April 3, 2009, Defendants filed an amended answer with affirmative defenses and counterclaims.
Plaintiff moved to dismiss certain counterclaims and affirmative defenses raised in the amended answer. The court dismissed five of the counterclaims and three of the affirmative defenses. It dismissed the fraud in the inducement and duress counterclaims on the grounds that they were dismissed by a prior order; the civil conspiracy counterclaim was dismissed because the “underlying wrong” upon which the counterclaim was premised is a violation of state insurance regulations, for which there is no private right of action under either New Jersey or Colorado law; the counterclaims for fraud and gross negligence were barred by the statute of limitations; and, the affirmative defenses based on the Guaranties were dismissed as having been decided on a prior motion.
