In Rose v. Friendly Finance Corp., 2016 WL 98597, at *1 (S.D.Ohio, 2016), Magistrate Judge Kemp alleged a consumer’s claim to proceed against an automobile finance company for its practice of force placing insurance.

Ms. Rose alleges that Friendly Finance improperly added the cost of automobile insurance, procured through American Modern, to her loan balance and the loan balances of the putative class members, a practice known as force-placing insurance. According to Ms. Rose, the force-placing of insurance was improper because she and other putative class members had already purchased automobile insurance, and the cost of adding the second, unnecessary policy resulted in a significant increase in the amount of their respective loans. Ms. Rose asserts that, on at least one occasion, Friendly Finance rejected her own insurance policy on the grounds that the deductible was too high (specifically based upon its claim that the contract required her to have an insurance policy with a deductible no higher than $1,000), but no contract terms permitted Friendly Finance to do so. Ms. Rose further alleges that Friendly Finance falsely represented that it obtained individual policies for her and the putative class members when, in fact, it simply added them to its existing master policies with American Modern. Ms. Rose asserts that Friendly Finance used this practice in order to improperly impose fees on her and the putative class members, “which Friendly Finance misrepresented were ‘premiums’ for their individual policies, and split the fees with American Modern.”

The District Court found that the Consumer’s failure to maintain insurance in breach of the contract did not prohibit her from bringing a breach of contract claim against the finance company for allegedly improperly force placing insurance.

Ms. Rose’s failure to obtain the required insurance in some instances does not prohibit her from pursuing her breach of contract claim. See Longest v. Green Tree Servicing, LLC, 74 F. Supp.3d 1289 (C.D. Cal. 2015)(rejecting defendants’ argument that “plaintiffs’ failure to maintain hazard insurance constitutes a material breach of the mortgage, and thus defendants’ alleged breach – i.e., the allegedly improper acquisition of…policies – was excused”). The contract terms expressly gave Friendly Finance the option to continue the agreement and protect its interest in the vehicle if Ms. Rose failed to obtain the required insurance. Given those terms, it cannot now rely on Ms. Rose’s alleged failure to obtain insurance as a reason to bar her breach of contract claim. See id., citing Williston on Contracts § 39:31 (4th ed.); Persaud v. Bank of Am., M.A., 2014 WL 4260853, at *8 (S.D. Fla. Aug. 28, 2014)(“Contrary to Defendants’ argument, the fact Plaintiff initially breached the Mortgage when his insurance policy lapsed does not preclude his breach of contract claim”); Hamilton v. SunTrust Mortg., Inc., 6 F. Supp.3d 1300, 1309 (S.D. Fla. 2014) (“SunTrust chose to continue the mortgage contracts by exercising its discretion to force-place insurance after Plaintiffs’ admitted breaches…For this reason, Plaintiffs’ prior breaches of their mortgage contracts –regardless of whether they were material breaches – do not preclude their claim for breach of implied covenant of good faith and fair dealing against SunTrust”).