NEW YORK ( TheStreet) -- Shares of bond insurer MBIA ( MBI) jumped 5% following a landmark ruling that may give the company an upper hand in its long-running dispute with Bank of America ( BAC) over failed mortgage-backed securities. Judge Jed Rakoff on Tuesday ordered Flagstar Bancorp ( FBC) to pay bond insurer Assured Guaranty ( AGO) $90.1 million in damages in a dispute over souring mortgage-backed securities valued at more than $900 million. Assured Guaranty, which provides lenders insurance against defaults, had sued Flagstar over two securitizations, alleging the bank had misrepresented the quality of the loans underlying the mortgage-backed securities. Assured claimed it was entitled to be reimbursed for the payment of the insurance claims that arose when the loans defaulted. The case is similar to those filed by other bond guarantors including MBIA and Ambac against banks such as Bank of America, JPMorgan Chase ( JPM) and Credit Suisse ( CS). Rakoff ruled that Flagstar had breached its representations and warranties. He also dismissed arguments that the loans would have defaulted anyway or that the defects were immaterial, an argument often used by banks in defense against similar cases filed by investors and bond insurers. "It is irrelevant to the court's determination of material breach what Flagstar believes ultimately caused the loans to default, whether it is a life event or if the underwriting defects could be deemed 'immaterial' based on 12 months of payment. Risk of loss can be realized or not; it is the fact that Assured faced a greater risk than was warranted that is at issue for the question of breach," the judge said in his ruling. While the ruling is an obvious win for Assured Guaranty -- its stock is up 5.3% Wednesday -- the case has important implications for MBIA. For one, the insurer also has a case against Flagstar over mortgage-backed securities of an underlying value of $165 million. Flagstar might be liable to pay claims under that case too. But the ruling might also set a precedent for MBIA's case against Bank of America, which has turned out to be a complicated legal fight. MBIA has sued Bank of America, arguing the bank's Countrywide unit made false representations in mortgages it sold and MBIA agreed to insure. Meanwhile, Bank of America has challenged the insurer's separation into two legal entities in an attempt to protect its municipal-insurance business from mortgage-related liability. MBIA bulls, including investment manager Bruce Berkowitz, expect Bank of America to settle the case, which could result in an estimated $2 billion to $3 billion check. This ruling could further weaken Bank of America's case and nudge it toward a settlement. For more on what this means for Flagstar, read Flagstar's Stock, Punished This Year, Could Rebound Big. -- Written by Shanthi Bharatwaj in New York For more on Bank of America's fight with MBIA, read MBIA Bulls Differ on Bank of America Life or Death Deal.