Allstate Corp., the largest publicly traded U.S. home and auto insurer, sued Credit Suisse Group AG units over claims they fraudulently sold the insurer more than $231 million of residential mortgage-backed securities.
Allstate asked for damages including the lost market value of the securities, plus principal and interest payments in the suit, filed yesterday in New York state Supreme Court.
Credit Suisse is the latest target of Allstate’s litigation over mortgage-backed securities. The company last month sued JPMorgan Chase & Co. over $700 million of the securities the bank sold the insurer; Citigroup Inc., over more than $200 million; and Deutsche Bank AG, over about $185 million. Allstate said the banks misrepresented underwriting standards, owner occupancy data and loan-to-value ratios.
“The systemic (but hidden) abandonment of the disclosed underwriting guidelines led to soaring default rates in the mortgage loans underlying the certificates,” Allstate said in the Credit Suisse complaint. “The value of Allstate’s certificates has plummeted, causing Allstate to incur significant losses. These losses were not caused by the downturn in the U.S. housing market, but by the defendants’ faulty underwriting.”
Duncan King, a spokesman for Credit Suisse, declined to comment.
The case is Allstate Insurance Co. v. Credit Suisse Securities (USA) LLC, 650547/2011, New York state Supreme Court, New York County (Manhattan).