In January of 2011, 10 ACE Group Companies agreed to pay $70 million in settlement fees to the New York Workers’ Compensation Board after an investigation into whether certain insurance companies had been overcharging policyholders.
Mortgage Fallout Continues as Realty Services Firm Sues ACE
December 9th, 2014 - The world’s largest privately held commercial real estate services firm has sued ACE American Insurance Co. over its alleged refusal to defend it in a series of actual or threatened lawsuits tied to the mortgage meltdown that began in 2008.
Cushman & Wakefield Inc. sued the ACE Group unit in U.S. District Court in Chicago, along with co-defendants Illinois National Insurance Co., Liberty Mutual Insurance Co. and RLI Insurance Co. The New York firm seeks a declaration that all insurers owe it a duty to defend it in several lawsuits tied to property valuations that fell starting in 2008.
Between 2004 and 2007 Credit Suisse AG hired Cushman & Wakefield to provide real estate appraisals for loans made to developers of large, master-planned residential communities. Credit Suisse arranged and underwrote the loans, which were bought by institutional lenders and hedge funds.
Beginning with the economic downturn of 2008, many of those loans went into default. That prompted four separate lawsuits against parties involved in the communities, including homeowners and developers who questioned the “total net value” appraisal approach that Cushman & Wakefield used to determine the value of the housing units.
Cushman & Wakefield had purchased errors and omissions coverage from ACE for the policy year starting May 31st, 2009. The coverage includes a provision for real estate appraisals on behalf of clients and was in excess of a policy written by Illinois National.
Cushman & Wakefield said that on three occasions between April and September, ACE said it would pay a portion of ongoing legal expenses tied to the claims. In particular, on April 14th, ACE and Illinois National agreed to a 50-50 split on Cushman & Wakefield’s defense costs, according to the complaint. Yet no payments had been made.
Cushman & Wakefield accused ACE of breach of policy obligations and implied covenant of good faith and fair dealing. It asked the court to force the insurer to defend the plaintiff.
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