CHICAGO — A New York State court judge has ruled that Assured Guaranty Corp. is on the hook to cover $83.3 million of Iowa’s Xenia Rural Water District bonds as part of its reinsurance agreement with CIFG Assurance North America Inc.
New York County Supreme Court Judge Barbara Kapnick issued a summary judgment dated Tuesday on the various claims asserted by CIFG in its lawsuit against Assured and counterclaims alleged by Assured over whether the policy qualified for inclusion in a reinsurance agreement struck in early 2009.
Kapnick rejected Assured’s arguments that it was permitted to exclude the policy retroactively because the district had begun to experience financial stress and should not have carried an investment-grade bond rating. The reinsurance agreement allows for the exclusion of any policies on bonds rated below investment grade by rating agencies or based on CIFG’s internal ratings on Oct. 31, 2008.
At the time, CIFG rated the bonds investment grade as did Standard & Poor’s. Xenia later defaulted on the bonds and CIFG — which lost its triple-A ratings in the financial crisis and sought the reinsurance agreement with Assured — has covered recent debt-service payment shortages.
CIFG “is entitled to summary judgment in its favor on both its first and second counts and a declaration that Assured is responsible for paying losses relating to and arising out of claims under the Xenia policy,” Kapnick’s order read.
The judge dismissed CIFG’s charge that Assured had acted in bad faith along with Assured’s request that the Xenia bonds be declared ineligible for coverage under the agreement.
