Court: District Court, S.D. Florida; November 5, 2015; Federal District Court
The Court is addressing motions to dismiss filed by Assurant, Inc., American Security Insurance Company, and Select Portfolio Servicing, Inc. regarding a class action complaint initiated by the Plaintiff on June 2, 2015. The Plaintiff claims that SPS, in conjunction with the Assurant Defendants, overcharged for force-placed flood insurance premiums for borrowers, including himself, whose loans SPS serviced or owned. The Plaintiff's mortgage, secured by property in a low-risk flood zone in Broward County, Florida, had an insurance premium drastically higher than the market rate. From 2010 to 2014, premiums charged ranged from $1,498.58 to $2,326.50 compared to a market rate of $414.00. The Plaintiff alleges that the premiums included undisclosed "unearned kick-backs" to SPS and claims six counts: Breach of Contract, Breach of the Implied Covenant of Good Faith, Unjust Enrichment (against SPS and the Assurant Defendants), a violation of the Truth in Lending Act against SPS, and Tortious Interference with a Business Relation (against all Defendants).
The Court outlines the standard for pleading a claim for relief under Rule 8(a)(2) and the threshold for a motion to dismiss under Rule 12(b)(6), emphasizing that claims must provide enough factual content to suggest a plausible entitlement to relief. Allegations must be taken as true unless they are merely conclusory statements without supporting facts.
A district court evaluating a motion to dismiss focuses on whether a plaintiff can present evidence to support their claims, rather than determining the likelihood of success. Each of the three defendants—SPS, American, and Assurant—has submitted individual motions to dismiss, citing various grounds. SPS contends that the complaint should be dismissed for failing to allege compliance with notice and opportunity to cure requirements, for common law claims (including Breach of Contract and Tortious Interference) being legally insufficient, for the TILA claim's failure, and for the filed-rate doctrine blocking excessive premium claims. American argues for dismissal based on the filed-rate doctrine, controlling authority, and failure to exhaust administrative remedies under Florida law, while also challenging the Unjust Enrichment and Tortious Interference claims as fundamentally flawed. Assurant claims that the plaintiff has sued the incorrect party and supports American’s arguments. Due to overlapping arguments, the court will consider the motions collectively where applicable.
The filed-rate doctrine is central to the defendants' argument, asserting that claims related to excessive premiums fail because these were the rates authorized by Florida insurance regulators. The doctrine prohibits regulated entities from charging rates other than those filed with regulatory authorities and is grounded in principles of nondiscrimination and nonjusticiability. Nondiscrimination prevents claims that would allow a plaintiff to pay a rate lower than others, while nonjusticiability bars claims that indirectly challenge filed rates. American has provided evidence supporting its motion, including a declaration and exhibits detailing approved premium rates in Florida for the Flood Program, which the court has judicially noticed as reliable public records. The plaintiff claims the issue lies not with the rate itself but with alleged "kickbacks" and collusion among the defendants, a distinction the defendants argue is irrelevant.
Plaintiff contends that SPS cannot invoke the filed-rate doctrine because it is not an insurer under the applicable regulatory framework. However, the Court, referencing the Second Circuit's decision in Rothstein, finds Plaintiff's arguments unconvincing. In Rothstein, the court ruled that the filed-rate doctrine applies even when a servicer pays a lower rate to an insurer, as recognizing otherwise would undermine the principles of nondiscrimination and nonjusticiability inherent in the doctrine. The Court extends this rationale to the current case, determining that all claims related to inflated rates against the three Defendants should be dismissed with prejudice.
Additionally, the Court addresses the implications of Feaz v. Wells Fargo Bank, where the Eleventh Circuit clarified that federally mandated flood insurance amounts are minimums, not maximums. The court upheld the dismissal of Feaz's complaint, asserting that lenders can require more coverage than the loan balance. Defendants argue that Feaz undermines Plaintiff's claims, particularly regarding alleged kickbacks linked to excessive flood coverage. Plaintiff counters that Florida law, which recognizes a general fiduciary duty from lenders to borrowers, is applicable here, contrasting with the lack of such duty under Alabama law in Feaz. The Court acknowledges that the Florida case Hamilton v. Suntrust Mortgage suggests a breach of the implied covenant of good faith related to forced insurance placement and kickbacks, but Defendants argue that Hamilton does not affect Plaintiff's excessive coverage claims, as these claims pertain to coverage exceeding the lender's security interest.
Inflated premium claims are prohibited by the filed-rate doctrine, and simply labeling a commission as a kickback does not suffice to classify it as such, as the lender was not acting in the borrower’s interest. The insurance requirement in the loan agreement is primarily for the lender’s protection. The court affirms that the Feaz case governs the plaintiffs' claims regarding excessive flood insurance coverage, leading to the dismissal of those claims against the Assurant Defendants. Only the claims of Unjust Enrichment and Tortious Interference with a Business Relation remain, both of which are based on excessive premiums and alleged kickbacks that inflated insurance costs. The court also notes that the plaintiff failed to comply with the notice and cure requirement outlined in the Mortgage Agreement, which necessitates providing notice before initiating legal action regarding any alleged breaches. This provision mirrors a similar case (Hill v. Nationstar Mortgage LLC), where lack of notice led to dismissal of claims. The court concludes that the plaintiff’s allegations fundamentally arise from the Mortgage Agreement, mandating dismissal of claims related to breaches of contract and implied covenants. The only claim not subject to the notice requirement is the TILA claim, which pertains to statutory obligations.
Plaintiff argues that notice was not required to be given to SPS, a loan servicer, as it is not the "Lender" under the contract. The Court disagrees, noting that Plaintiff refers to SPS as both a servicer and lender in the Complaint. Citing the precedent set in Hill, the Court states that the loan servicer holds the contract rights and obligations of the Lender regarding loan servicing. Plaintiff claims that standard mortgage provisions allow for "force placement" of insurance by the lender or servicer, and that the mortgage agreements of himself and class members contain similar provisions. Consequently, the Court dismisses Counts I, II, III, and VI against SPS due to Plaintiff's failure to allege notice and opportunity to cure.
Regarding the claim under the Truth in Lending Act (TILA), the Court finds that TILA does not require disclosure of property insurance costs since these are not classified as "finance charges." The Mortgage Agreement specifies that the borrower selects the insurance carrier, aligning with SPS’s argument that disclosure at loan consummation (closing) was unnecessary. Although Plaintiff contends that new disclosures were needed after force-placed flood insurance charges were added, TILA's Official Commentary indicates that changes in insurance coverage due to borrower noncompliance do not render original disclosures inaccurate.
The Court grants the motions to dismiss, concluding that the Complaint is dismissed in its entirety. Claims regarding "inflated premiums" are dismissed with prejudice based on the filed-rate doctrine, while the remaining claims are dismissed without prejudice, allowing Plaintiff to file an amended complaint by December 3, 2015. The Court notes that not all arguments were addressed, but defendants may raise any unconsidered arguments later. Additionally, the Court emphasizes that the filed-rate doctrine is applicable, aligning with similar decisions, despite Plaintiff citing contrary district court cases. Some claims overlap with those in Hill, including unjust enrichment and breach of contract.
