Allstate Insurance (ALL) filed a $104 million lawsuit against Morgan Stanley (MS) this week, claiming the investment bank misrepresented toxic loans underlying residential mortgage-backed securities sold to Allstate. Allstate’s complaint against Morgan Stanley is the latest in a series of legal filings initiated by the insurer against big banks on the grounds they sold RMBS without disclosing some of the dangers tied to the underlying collateral. By mid-March, Allstate had sued seven banks over RMBS sales, including Credit Suisse (CS), Bank of America (BAC) and JPMorgan Chase (JPM). Three months ago, Allstate estimated it had acquired $2.78 billion in mortgage-backed securities during the run-up to the financial meltdown. In the suit filed this week, Allstate claims it purchased $104 million in RMBS securitized by Morgan Stanley (MS) after trusting the bank’s assertion that loan originators used conservative underwriting guidelines. “Allstate invested in highly-rated RMBS, bearing AAA ratings, in reliance on Morgan Stanley’s representations that it had conducted due diligence on the mortgages backing the RMBS and that those mortgages were originated according to specific underwriting guidelines and collateralized by accurately appraised properties,” Allstate pleaded in its complaint. Allstate says it eventually learned “the originators whose loans collateralized the Morgan Stanley RMBS purchased by Allstate were among the worst of the worst culprits in the subprime lending industry.” Those named originators included New Century Financial Corp., WMC Mortgage Corp., Decision One Mortgage Co., First NLC Financial Services, AIG Federal Savings Bank and Wilmington Finance Inc., according to court filings. Allstate accuses Morgan Stanley of common law fraud, fraudulent inducement, aiding and abetting and negligent misrepresentation. A spokesperson for Morgan Stanley could not be immediately reached for comment. Write to Kerri Panchuk.