Class Action Lawsuit Rejected On Property Insurance Costs

September 25, 2018

A divided federal appeals court Monday rejected class-action lawsuits filed by Florida homeowners who said they were charged too much for property insurance after leaving it to mortgage companies to buy coverage.

The ruling by a three-judge panel of the 11th U.S. Circuit Court of Appeals dealt with what is known as “force-placed insurance,” which occurs when people with mortgages do not buy property-insurance coverage. Lenders then buy coverage and pass along the costs to the borrowers.

Four Florida residents and a Pennsylvania resident filed class-action lawsuits in 2015 against two mortgage-servicing companies and American Security Insurance Co., alleging a scheme that led to inflated charges for force-placed insurance. At least in part, they alleged that Specialized Loan Servicing, LLC and Caliber Home Loans, Inc. received rebates from American Security Insurance, the force-placed insurer, but didn’t pass along those savings to the borrowers, according to Monday’s ruling.

The lawsuits, which became consolidated, included a series of allegations, including breach of contract, racketeering, violation of the Federal Truth in Lending Act and violation of the Florida Deceptive and Unfair Trade Practices Act.

But the appeals court, in a 28-page majority opinion, upheld decisions by a U.S. district judge in South Florida to dismiss the cases. The opinion centered on state regulators approving the rates charged by American Security Insurance — and a legal concept, known as the filed-rate doctrine, that seeks to keep courts out of rate-making decisions.

“The plain language of the complaints … shows that the plaintiffs are challenging the reasonableness of ASIC’s (American Security Insurance’s) premiums; and since these premiums are based upon rates filed with state regulators, plaintiffs are directly attacking those rates as being unreasonable as well. … Because the plaintiffs should be understood as meaning what they say, we find that they have challenged ASIC’s filed rate. As such, there can be no doubt that their causes of action are barred by the filed-rate doctrine,” said the majority opinion, written by Judge Danny J. Boggs and joined by Judge Frank Hull.

But Judge Adalberto Jordan wrote a 36-page dissent that said the federal appeals court should send the issue to the Florida Supreme Court and the Pennsylvania Supreme Court for guidance about how the states view the filed-rate doctrine. He also took issue with the majority’s interpretation of the facts in the cases.

“ASIC and the lenders argue that the filed rate doctrine bars the homeowners’ claims because they amount to generalized grievances that ASIC’s insurance rates are unreasonably high, and seek only to force the defendants to sell (in ASIC’s case) or bill for (in the lenders’ case) insurance at lower rates,” Jordan wrote. “But that argument misreads the homeowners’ claims. The homeowners assert that, regardless of the insurance rate ASIC charged, the lenders are contractually obligated to charge only the amount of insurance they actually paid. By engaging in side agreements with ASIC for ‘commissions,’ ‘reinsurance,’ and other kickbacks — transactions that are of course, unregulated — the lenders found a way to discount their insurance costs. Given that the mortgage contracts between the homeowners and the lenders required the lenders to charge the homeowners for only ‘the cost’ of insurance, the lenders breached those contracts by demanding more than the discounted cost they paid ASIC.”

by Jim Saunders, The News Service of Florida

Comments





Have a comment on this story?

We welcome your comments on this story, but there are some rules to follow::

(1) Be Nice. No comments that slander another, no racism, no sexism, no personal attacks.

(2) No Harrassing Comments. If someone says something bad about you, don't respond. That's childish.

(3) No Libel. That's saying something is not true about someone. Don't do it.

(4) Keep it clean. Nothing vulgar, obscene or sexually related. No profanity or obvious substitutions. Period.

(5) NorthEscambia.com reserves the right to remove any comments that violate our rules or we think to be inappropriate. We are not responsible for what is posted. Comments may not appear right away until they are approved by a moderator.

(6) Limit your comments to the subject in this story only, and limit comments to 300 words or less. Do not post copyrighted material. Comments will not be added to stories that are over 30 days old.

(7) No posts may advertise a commercial business or political group, or link to another commercial web site or political site of any kind.