(Article from Insurance Law Alert, October 2018)
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The Eleventh Circuit dismissed class action suits against mortgage service providers relating to force-placed insurance, finding that the claims were barred by the filed-rate doctrine. Patel v. Specialized Loan Servicing, LLC, 2018 WL 4559091 (11th Cir. Sept. 24, 2018).
Homeowners alleged that their service providers breached loan contracts and the implied covenant of good faith and fair dealing by charging inflated premiums for force-placed insurance. In particular, the complaints alleged that the mortgage service companies received kickbacks from the insurance company that issued the force-placed insurance after the homeowners’ prior insurance coverage had elapsed. A Florida district court dismissed the actions on the basis of the filed-rate doctrine, which precludes judicial challenges to rates that are filed with and approved by a government regulatory agency. The Eleventh Circuit affirmed.
The Eleventh Circuit reasoned that the underlying claims directly challenged the reasonableness of the premiums of the force-placed insurance. Because the premiums were based upon rates filed with Florida state regulators, the court held that the filed-rate doctrine squarely applied. The court emphasized that allegations of a fraudulent kickback scheme did not alter this result because there is no fraud exception to the filed-rate doctrine. The court cited Rothstein v. Balboa Ins. Co., 794 F.3d 256 (2d Cir. 2015) (discussed in our September 2015 Alert), which similarly held that fraud claims based on lender-placed insurance rates were barred by the filed-rate doctrine, even where the rates were imposed by an intermediary rather than by the insurance companies that obtained regulatory approval for those rates.
As discussed in our May 2011 and October 2010 Alerts, other courts have similarly enforced the filed-rate doctrine to bar fraud claims against insurance companies, although application of the doctrine varies by jurisdiction.