Bad faith is the unreasonable failure of an insurance company to honor the terms of an insurance policy and deal with a policyholder in good faith. Insurance companies who are found to have acted in bad faith can be liable for punitive damages in addition to contract damages. Some states have bad faith statutes called "Unfair Insurance Claims Practices Acts."
Give Back the Money, Bankruptcy Trustee Tells ACE American
January 24, 2012 - The trustee in the bankruptcy of a scandalous Florida mortgage company has sued ACE American Insurance Co. to recover funds allegedly wired to the insurer prior to the mortgage company’s insolvency.
Neil F. Luria, trustee to the Taylor, Bean & Whitaker Plan Trust, said in a petition filed in U.S. Bankruptcy Court in Jacksonville, Fla., that he demanded ACE American return $172,157.73. However, the ACE USA Group unit reportedly has not re-paid the amount requested, leading to the suit.
Taylor, Bean & Whitaker Mortgage Corp. was one of the nation’s largest wholesale mortgage lenders when on Aug. 3, 2009, FBI agents raided its offices in Ocala, Fla., in connection with a probe of the firm’s takeover of Colonial BancGroup. The company, based in Ocala, Fla., ceased operations and on Aug. 24, 2009, declared bankruptcy.
Luria’s suit said that in the 90 days leading up to the bankruptcy petition, Bean wired three payments to ACE American. The precise nature of the business relationship was not described, but Luria said that ACE American is a creditor of Taylor, Bean. So he sued the insurer pursuant to laws that bar preferential transfers of funds to creditors in run-ups to bankruptcy filings.
Taylor, Bean was described by DSNews.com as “possibly one of the most notorious mortgage fraud schemes in U.S. history.” The company’s bankruptcy triggered the collapse of regional lender Colonial Bank and cost government loan guarantors billions of dollars, said the mortgage default servicing newsletter.
Lee Farkas, founder and chairman of Taylor, Bean, was sentenced in June to 30 years in prison after being found guilty of federal charges of conspiracy, bank and wire fraud.
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