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[xraider]

The trial court issued a tentative decision holding that Prosper's insurer, Greenwich, has a duty to defend the class action.  I can't post the decision, but this may take you to the link.  Warning: it's 17 pages of legalese. 

http://webaccess.sftc.org/Scripts/Magic94/mgrqispi94.dll?APPNAME=IJS&PRGNAME=ROA22&ARGUMENTS=-ACGC09491736  From there, click on December 14, 2010 tentative decision.

Basically, in plain English, the opinion says that the policy is ambiguous so there is a duty to defend. It says nothing about the duty to indemnity (settle or pay any judgment) but I think this court would find that duty, as well.

The coverage litigation is all over, except for the appeal.

[God-Father]

So, I would assume that for Prosper and its ongoing viability, this is good news.  It does not have to use its money to defend the class action.  It probably won't have to use its funds do pay the class action (should it be successful).  Investors are more likely to invest.

As far as the class action, is seems to be good news in that there are probably now deep pockets to pay should Prosper lose.  But, it is bad news because Greenwich has deeper pockets than Prosper to defend the class action.  I guess it could be good news because Greenwich is probably more likely to settle than Prosper would have been (because Prosper had very little to lose by defending this to its last penny).

[God-Father]

Lobby

[mothandrust]

Second for lobby.

Can't decide who is worse: bankers, lawyers, or insurers.  Really must stink to be paying premiums for years and when you finally need them to pay a claim, they try weaseling out of paying a claim.

[xraider]

God-Father, in insurance speak, the duty to defend is broader than the duty to indemnify (pay any settlement or judgment), so technically speaking, Prosper may still be on the hook for paying any class action judgment, or contributing to any settlement.  However, Prosper does have two very expensive law firms, and this order only goes to the payment of one of them -- the defense of the class action.  Without giving Prosper any hints (its very expensive law firms know this), I would expect that any settlement of the coverage dispute will include at least a hefty contribution to coverage counsel's fees.  Of course, Greenwich could appeal the coverage determination.

Gee, Moth, I'm an insurance attorney and I carpool with two bankers.  I guess you don't want us at your Christmas party.   

BTW, OK with me for lobby.

[havastat]

Big news, definitely lobby worthy.

Both Prosper and its investors are better off if there is someone else is able to pay for settling their troubles.

Both may also be better off if these troubles get settled and the matter over with and no longer hanging over Prosper's future.

[havastat]

Wanted to bump this thread.

This is a huge issue that's worth some discussion. Even though Prosper may run out of money anyway, the decision at least suggests that any liability will ultimately be covered by insurance, easing a huge potential risk for Prosper. This both makes it more likely that Prosper 1.0 lenders will be offered something in a settlement, and also increases Prosper's chances of surviving or being acquired if its new model can gain traction in the next few months.

[ira01]

the decision at least suggests that any liability will ultimately be covered by insurance, easing a huge potential risk for Prosper. This both makes it more likely that Prosper 1.0 lenders will be offered something in a settlement, and also increases Prosper's chances of surviving or being acquired if its new model can gain traction in the next few months.

Not really.  The duty to defend is MUCH broader than the duty to indemnify under CA law.  Thus, the fact that Prosper's insurer was found to have a duty to defend says little about whether it would actually have to cover any judgment or contribute to any settlement.  It is kind of similar to how OJ Simpson's acquittal in the criminal case did not prevent his being found liable to his victim's families in the civil case.  Because different legal standards apply to the same facts, you can easily get two different outcomes. 

[xraider]

Wanted to bump this thread.

This is a huge issue that's worth some discussion. Even though Prosper may run out of many anyway, the decision at least suggests that any liability will ultimately be covered by insurance, easing a huge potential risk for Prosper. This both makes it more likely that Prosper 1.0 lenders will be offered something in a settlement, and also increases Prosper's chances of surviving or being acquired if its new model can gain traction in the next few months.

Havastat, this litigation has a very long way to go, with an appeal on file in the class action about whether the directors can be personally pursued as defendants.  The appeal has been fully briefed, but oral argument has not been set.  The appeal is still months away from conclusion, and only after that will the class action litigation start up again.  If, as predicted, Prosper runs out of capital in April, 2011, it may all be moot anyway.

I do have to laugh about Prosper managing to survive so far with Zopa and Virgin Money failing. 

[msava]

Board lawyers, in babytalk - exactly what is the lawsuit asking for?

I'm just curious if this is another class action where only the lawyers get paid and the lenders get an apology?

[xraider]

MsA, I tend to see class actions the same way.

The coverage litigation was brought by Prosper against its liability insurer because the insurer declined to provide Prosper with a defense in the coverage action.

Prosper won the first round in the coverage action, and its defense in the class action will be paid by its insurer.

The ruling doesn't impact the insurer's obligation to pay any settlement.  Yet.

[Xenon481]

Board lawyers, in babytalk - exactly what is the lawsuit asking for?

I'm just curious if this is another class action where only the lawyers get paid and the lenders get an apology?

I believe that the class action is seeking 100% repurchasing of all delinquent loans.

[laxa]

Just the delinquent loans? Why not all the loans? Can you really cherry pick like that?

[Beerbud1]

This thread is about Prosper's Insurance Company. Their Insurance Company was refusing to pay Prosper's defense costs in the Class Action Lawsuit.
Xraider was updating the thread with information that she gained publicly about Prosper and their case against their insurer, it is not about the Class Action suit.

The Class action case will be determinded by the Judge.

[ira01]

Just the delinquent loans? Why not all the loans? Can you really cherry pick like that?

That is an open question.  In theory, lenders should be allowed to cherry-pick and require Prosper to repurchase only the defaulted loans, since we were the victims of Prosper choosing to illegally sell us unregistered securities (as determined by the SEC).  Although I haven't researched the issue, and this certainly is not legal advice, I analogize this situation to fraudulently induced contracts, which are not void, but voidable at the option of the defrauded party.  Similarly, lenders should have the option of "returning" any of our loans we choose to Prosper, which should have never sold them to us in the first place.