It might be an overstatement to say that AIG (AIG -0.04%) wants Bank of America's (BAC 1.70%) head on a platter, but it's not far-fetched to say that the insurer is ready to get tough with the bank. With one more court ruling going to AIG's win column, a long-standing suit can start moving along, with $7 billion in damages hanging in the balance.

AIG: 2 BAC: 0
A federal court judge ruled in favor of AIG on Monday when she wrote that the insurer did not give up its rights to pursue certain legal claims after it sold troubled securities to the Federal Reserve Bank of New York during a 2008 bailout. This ruling clears up a major blockade that had halted any proceedings, with Bank of America claiming that when AIG transferred the securities to the FRBNY, it lost any ability to sue over the investments.

This new ruling came after another in favor of the insurer, which petitioned for the case to be moved to the state court systems -- arguing that the federal court system was not the correct venue for the case. A judge agreed, with a ruling that the case should be heard in the New York State courts.

AIG: 2 BAC: 0.5
With the case proceeding, AIG will be fighting on a few less items because of the judge's having dismissed some claims as a part of Monday's ruling. While the judge agreed that AIG's claims adequately allege that documents provided to it from Countrywide and Merrill Lynch may have misrepresented the securities allowing a claims for "fraudulent inducement," she dismissed the claim of "negligent misrepresentation."

AIG is still happy with the ruling, stating that it is now capable of pursuing its full damages from the bank.

With Bank of America's recent settlement with insurer MBIA (MBI 3.45%), it may have set a precedent for future insurer claims. While there's no telling if AIG and B of A will settle out of court, the bank may find it more favorable to do so -- getting its name out of the headlines and putting another legacy legal battle behind it. 

Elsewhere -- AIG: 2 BAC: 1.5
AIG is also stepping up against Bank of America in another case. Leading a pack of investors, AIG filed paperwork with the courts handling the hearings scheduled for later in the month that will determine if the bank's agreed-upon $8.5 billion settlement over mortgage-backed securities will be approved. Stating that the settlement was unreasonable and too small, AIG is taking a firm stance against the approval.

Unfortunately for AIG, other interested parties are moving in the opposite direction. Both the State of New York and Delaware have removed their objections to the settlement. This happened just a day after the FHFA, which manages Freddie Mac and Fannie Mae, dropped its objection as well.

A real battle?
As the new rulings come in, this story will continue with both businesses taking hits in the market if decisions don't go their way. As we've seen with the B of A-MBIA settlement, investors like the idea of the bank putting these old issues behind it. And as investors return to AIG, it's a great move for the company to continue to seek damages for the losses it sustained from allegedly misrepresented securities. Investors should keep an eye on how this story develops, with the ultimate win likely to make a big splash in the market.