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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

Bad Faith Suit Filed Against ACE Westchester Companies for Failure to Defend Mortgage Meltdown Lawsuit

July 11, 2011 - A banking information company has sued ACE Group companies Westchester Fire Insurance Co. and Westchester Surplus Lines Insurance Co. over their alleged failure to defend it in a third-party lawsuit that was sparked by the debacle of the national home mortgage crisis.

Fiserv Solutions Inc. said in a lawsuit filed in U.S. District Court for Eastern Wisconsin that Westchester Fire had earlier agreed to defend it in legal action brought against the firm by United General and First American Title Insurance Co. That was on Dec. 13, 2010, but since then Fiserv said ACE - in a phrase it used repeatedly in its initial pleading against Westchester Fire - “has abandoned Fiserv and left it to defend itself.”

The legal fray began in 2009 when Bank of America NA sued United General and First American Title Insurance Co. in North Carolina state court. The bank said the two companies (First American has now assumed the liabilities and assets of United General) had failed to pay it at least $535 million worth of claims it filed with those insurers for losses arising from title defects, legal description errors, and undisclosed intervening liens in home mortgages.

United General and First American had appointed Fiserv as the agent of the insurers in connection with insurance policies they issued to lenders that participated in its QuickClose LPI Program. Bank of America said this replaced the traditional title search with statements from borrowers and credit reports intended to assure reliability of the loan.

After United General and First American commenced legal action against Fiserv, it asked the Westchester companies and three other insurers to pay for its defense and any subsequent damages.
Fiserv alleged in its lawsuit that the other insurers, which include Endurance American Specialty Insurance Co., XL Specialty Insurance Co., and Illinois National Insurance Co., have likewise stated that they may owe no coverage for the First American Action.

Fiserv accused the insurers of breach of the duty to defend and asserted that ACE acted in bad faith in denying coverage.  Fiserve asked the court to order the insurers to cover its defense costs and reimburse it for the full amount of  “any reasonable settlement” Fiserv may elect to enter prior to or following a final mediation session that currently is slated for Aug. 24-26.

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