A New York court granted partial summary judgment to bond insurer MBIA, saying the company only has to show Countrywide misrepresented the quality of loans packed into mortgage-backed securities to pursue a fraud case against the lender.

That standard of proof is lower than the burden Bank of America (BAC), which now owns Countrywide, was trying to impose on the insurer.

The ruling from the Supreme Court of the State of New York stems from an MBIA Insurance Corp. suit against Countrywide Financial Corp. In the initial complaint, MBIA sued Countrywide for fraud and breach of representations and warranties. MBIA claimed the subprime lender made mispresentations about the quality of mortgages sold into securitized trusts insured by MBIA.

Countrywide asked the court to establish a higher burden of proof for MBIA. The subprime lender, which is now part of Bank of America (BAC), said the insurer should be forced to prove Countrywide’s misrepresentations on the loans actually caused MBIA to lose money by paying claims on distressed mortgages. Countrywide argued in its own motion that a causal effect between the misrepresentations and the losses on claims payouts should be established before MBIA has a valid claim.

The court ruled against Countrywide and agreed with MBIA saying in court records “MBIA is not required to establish a direct causal link between defendants misrepresentations and MBIA’s claims payments made pursuant to the insurance policies at issue.”

Write to Kerri Panchuk.