(Bloomberg) — Coventry First LLC lost a bid to dismiss racketeering claims brought by a unit of American International Group Inc. in a dispute over the purchase of life insurance policies.
In the life settlement business, policyholders can get cash up front for their insurance, with the buyer collecting the death benefit when the seller passes away.
Lavastone, a unit of AIG, sued Coventry in September accusing its business partner of buying those policies at prices below what it knew the AIG unit would pay, then inducing Lavastone to pay the inflated prices, costing it more than $150 million.
Coventry, based in Fort Washington, Pennsylvania, countersued, accusing the AIG entity of breaking an agreement to buy policies from it exclusively, and said that its losses may exceed $100 million.
A Manhattan federal judge on Monday denied Coventry’s request that he throw out the bulk of Lavastone’s claims, including those alleging racketeering, fraud and breach of implied good faith, in an abbreviated decision, promising a fuller explanation than his three-page ruling “in due course.”
While the judge, Jed S. Rakoff, threw out some of Lavastone’s claims, he also rejected Coventry’s allegations that its former partner was in breach of contract.