Full article on Law360 here.
“Law360 (September 25, 2018, 9:01 PM EDT) — A split Eleventh Circuit has affirmed the dismissal of homeowner class litigation over force-placed insurance, saying the litigation violated a doctrine that prohibits challenges to regulator-approved rates.
The appeals court on Monday affirmed, 2-1, the tossing of litigation filed by homeowners whose home insurance, mandated by their lenders, had lapsed and was then replaced by the companies with “force-placed insurance.”
Named plaintiff Pankaj Patel’s servicer, SLS, paid American Security Insurance Co. to monitor SLS’s customers’ accounts and insurance statuses for lapses, and after sending warning letters to Patel, ASIC force-placed a policy for him and received a fee from SLS, he says. Of the five named plaintiffs, four are Floridians and one is a Pennsylvanian.
The appeals court said that the “filed rate doctrine,” which prohibits court challenges to rates approved by regulators, bars this case.
“Although the plaintiffs assert on appeal that they are not challenging the reasonableness of ASIC’s rates, the complaints belie this claim … The most obvious basis for this conclusion is the fact that the plaintiffs repeatedly state that they are challenging ASIC’s premiums,” the Eleventh Circuit said.
“Given, moreover, that the plaintiffs repeatedly use the language of market manipulation to characterize their causes of action, we cannot avoid the conclusion that they are directly challenging the rates that ASIC has filed with state regulators. Their complaints, therefore, contain textbook examples of the sort of claims that we have previously held are barred,” the court said.
The actions were filed in 2015 by homeowners who said American Security paid Caliber Home Loans Inc., another loan servicer, kickbacks in exchange for its forcing homeowners to take American Security lender-placed insurance policies at inflated rates. U.S. District Judge Jonathan Goodman dismissed the case, predicting that the Eleventh Circuit would reject the homeowners’ claims under the filed-rate doctrine.
U.S. Circuit Judge Adalberto Jordan dissented, saying the circuit used guesswork to impose the federal filed-rate common-law doctrine on states that have not adopted any such doctrine.
“The majority, without seeking guidance from the supreme courts of Pennsylvania or Florida, now confidently decrees that the federal filed rate doctrine is the governing rule in these two states. The majority also expands the filed rate doctrine to also bar claims against anyone whose contract seemingly concerns a filed rate. The majority then applies its sweeping rule to parties which have not filed any rates with state regulators,” Judge Jordan said.
ASIC, SLS, and Caliber did not even “establish that a state filed rate actually governs the challenged transactions — e.g., the kickbacks the lenders received from ASIC,” the judge said. This is especially problematic at the motion-to-dismiss stage, he said.
Judge Jordan was also troubled that the doctrine was used to dismiss claims against the lenders and servicers, who he said are not subject to it.
The majority “cites no Pennsylvania or Florida statute or regulation that governs regulated insurance products after ASIC sells it. Nor does it point to any court that has extended the filed rate doctrine to unregulated entities,” the judge said.
Representatives for SLS and the plaintiffs were not immediately available for comment. Representatives for Caliber and ASIC declined to comment.
In April 2017, Caliber Home Loans Inc. and American Security Insurance Co. asked the Eleventh Circuit to affirm the dismissal.
The homeowners are represented by Rachel Sullivan, Adam Moskowitz, Thomas Tucker Ronzetti and Robert Neary of Kozyak Tropin & Throckmorton LLP, Lance Harke and Howard Bushman of Harke Clasby & Bushman LLP, and Stephen Rosenthal, Aaron Podhurst, Peter Prieto and Matthew Weinshall of Podhurst Orseck PA.
Caliber is represented by Jan Chilton and Erik Kemp of Severson & Werson. American Security is represented by Franklin Burt, Farrokh Jhabvala, W. Glenn Merten and Brian Perryman of Carlton Fields Jorden Burt PA.
The case is Fowler et al. v. Caliber Home Loans Inc. et al., case number 16-16585, in the U.S. Court of Appeals for the Eleventh Circuit.
–Additional reporting by Jeff Sistrunk. Editing by Peter Rozovsky.”