Clearly, Putnam cannot argue that its misrepresentations were not made by the authority of the entity that prepared the very documents Case 1:12-cv-07372-RWS Document 27 Filed 10/29/13 Page 16 of 29 13 in which those misrepresentations were made and then actively used those misrepresentations to persuade FGIC to issue the Pyxis Guaranty. Thus, under N.Y. Ins. Law § 3105 and MBIA II, FGIC need not allege loss causation to sustain its fraud claim arising out of Putnam‟s misrepresentations. B. The SAC Adequately Pleads Loss Causation In any event, the SAC more than adequately meets the pleading standard for loss causation.

See MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 105 A.D.3d 412, 963 N.Y.S.2d 21 (2013). Citing New York Insurance Law § 3105 and § 3106, the First Department held that the financial guaranty insurer plaintiff was not required 18 to show loss causation in order to prevail on its claim against the sponsor to recover its claims payments. In the order appealed from, the First Department acknowledged its prior ruling, but simply “decline[d] to follow it.”

Neither John Hancock Life Ins. Co. v. Perchikov, 553 F.Supp.2d 229 (E.D.N.Y. 2008) nor New England Life Ins. Co. v. Taverna, 2002 WL 718755 (E.D.N.Y.) address discovery issues or other policies insuring similar risks. The statute at issue in this case, New York Insurance Law §§ 3105(c) is not cited or discussed in either case. Neither case involved the surge of elderly high value policies that swept Case 7:08-cv-06843-KMK-GAY Document 22 Filed 06/24/10 Page 4 of 6 SCHINDEL, FARMAN, LIPSIUS, GARDNER & RABINOVICH LLP Hon. George A. Yanthis June 24, 2010 Page 5 the insurance industry between 2003 and 2006 and have now become the center of this and many similar litigations.

However, if it does, 19 the decision would clearly be subject to reversal 18 But see, Becker, Moore & Co., Inc., v. United States Fidelity & Guaranty Co. et al., 74 F. 2d 687 (2d Cir., 1935) (applying New York law, and stating that the doctrine of material misrepresentation in insurance law, “has been settled law for more than a century and a half, [i.e. since 1785] that such collateral misrepresentations, though honestly made, will avoid a policy.”) 19 Kevin Schlosser, “First Department Rules NY Insurance Law 3105 Requires All Elements of Common Law Fraud, Including Causation” (May 22, 2017), available at, http://nyfraudclaims.com/first-department-rules-ny-insurance-law-3105-requires-elements- common-law-fraud-including-causation/ (stating that, “[t]he First Department ruled that Insurance Law 3105(b)(1) does not (a) dispense with the need to prove the elements of common law fraud in the context of avoiding insurance policies or declining to pay thereunder; and, Schlam Stone & Dolan LLP, “Insurance Law § 3105 Does Not Dispense With Requirement of Proving Reliance and Loss Causation” (May 22, 2017), available at, http://www.schlamstone.com/insurance-law-%C2%A7-3105-does-not-dispense-with- requirement-of-proving-reliance-and-loss-causation/ (stating that, “the First Department issued a decision in Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 2017 NY Slip Op. 03919, holding that Insurance Law Section 3105 does not dispense with the requirement to plead and prove reliance and l

5 Additionally, New York Insurance Law gives insurers the right to avoid an insurance contract procured through a material misrepresentation or to “defeat recovery thereunder” when a breach of warranty materially increases the risk of loss. See N.Y. Ins. Law §§ 3105, 3106. Insurers’ common law fraud and breach of contract claims are informed by these insurance law concepts.

at *4 (quoting Mittelstaedt) (emphasis in original). In this case, which is based on alleged misstatements made to insurance companies to induce them to issue life insurance policies, the legal meaning of materiality must be further refined with reference to New York Insurance Law § 3105 and its definition of materiality in the context of misrepresentations made to an insurance company by a would-be purchaser of an insurance policy in order to obtain a policy. That section provides in relevant part: “(c) In determining the question of materiality, evidence of the practice of the insurer which made such contract with respect to the acceptance or rejection of similar risks shall be admissible.”

L. & R. 5602(b)(2)(iii) ..................................................................... 6 N.Y. Civ. Prac. L. & R. 5713 ................................................................................... 19 N.Y. Ins. Law § 149 (McKinney 1939) ................................................................... 33 N.Y. Ins. Law § 150 (McKinney 1939) ................................................................... 33 N.Y. Ins. Law § 3105 ........................................ 17, 18, 26, 31, 32, 33, 34, 35, 37, 40 N.Y. Ins. Law § 3106 ...................................................................... 18, 31, 32, 33, 40 McKinney’s Cons. Laws of N.Y., Book 1, Statutes § 301(b) ................................. 40 Additional Authorities 6 COUCH ON INSURANCE § 82:20 (June 2017 update) ............................................. 28 45 C.J.S. Insurance § 859 (2016) ............................................................................. 24 Abraham Kaplan & George I. Gross, Commentaries on the Revised Insurance Law of New York (1940) ...................................................................... 32 Amasa J. Parker, Jr., INSURANCE LAW OF NEW YORK, N.Y. Ins. L. § 58 (Banks Law Publishing 1914) .............................................................................. 33 Andrew Amer & Linda H. Martin, The Standard of Materiality for Misrepresentations Under New York Insurance Law, 17 Conn. In

Under Ambac’s proposed rule, however, financial guaranty insurers could perform absolutely no due diligence, collect high premiums, and then, if the securities perform poorly, collect money damages for 4 misrepresentations which they never actually relied on and which have no connection to their losses. In the IAS Court and First Department, Ambac argued that New York Insurance Law Sections 3105 and 3106, which “informs” its claim, relieve insurers from proving all elements of their claims, an argument the First Department correctly rejected. Ambac now changes course, contending for the first time that the First Department “erred in construing Ambac’s inducement claim as arising under, and being limited by, Insurance Law §§3105 and 3106.”

Life Ins. Co. v. Doe, 93 N.Y.2d 122 (1999) Stipcich v. Metro. Life Ins. Co., 277 U.S. 311 (1928) 13 22, 23 23 15,23 16 25 12 17, 24 16 Statutes New York Insurance Law § 3105, New York Insurance Law § 3106, 2, 15,25 2, 15 ii Page(s) Other Authorities Christopher M. James, Mortgage-Backed Securities: How Important Is “ Skin in the Game”?, FRJBSF Economic Letter (Dec. 13, 2010)....

LLC, 2014 WL 4797010 (Sup. Ct. Westchester Cnty. Sept. 18, 2014) ............................................18 Statutes New York Insurance Law § 3105 .......................................................................................... passim -iii- New York Insurance Law § 3106 ..........................................................................................