Decambaliza, Colleen v. QBE Holdings, Inc. et al
ORDER granting 37 Motion to Dismiss ; denying 40 Motion for Oral Argument on Motion to Dismiss; granting 41 Motion to Dismiss ; granting 43 Motion for Leave to File documents. Signed by District Judge Barbara B. Crabb on 10/25/13. (krj)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - COLLEEN DECAMBALIZA,
on Behalf of Herself and
All Others Similarly Situated,
OPINION AND ORDER
QBE HOLDINGS, INC.; QBE INSURANCE
CORPORATION; QBE FINANCIAL
INSTITUTIONAL RISK SERVICES, INC.;
BANK OF AMERICA CORPORATION; BANK OF
AMERICA, N.A.; BAC HOME LOANS
SERVICING, LP; BANC OF AMERICA
INSURANCE SERVICES, INC.; BALBOA
INSURANCE COMPANY; MERITPLAN
INSURANCE COMPANY; and NEWPORT
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Under standard residential mortgage agreements, if a borrower’s hazard insurance
lapses, the lender may “force-place” insurance on the home by arranging for its own policy
at the borrower’s expense. In this case, plaintiff Colleen Decambaliza contends, on her own
behalf and on behalf of a proposed class of similarly situated homeowners that defendants
conspired to defraud homeowners by monitoring their hazard insurance for deficiencies,
force-placing new insurance with unnecessary and unreasonably high premiums and then
sharing in the profits through kickbacks and commissions. She has asserted claims for
monetary relief under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18
U.S.C. § 1962; the Wisconsin Organized Crime Control Act (WOCCA), Wis. Stat. §
946.83(3); and various other state laws. Before the court are defendants’ motions to
dismiss, motion for oral argument and motion for leave to file documents. No class has been
certified; plaintiff moved for class certification and then filed a motion to stay class
certification, which was granted. Dkt. #7.
Defendants QBE Holdings, Inc., QBE Insurance Corporation, QBE Financial
Institutional Risk Services, Inc., Balboa Insurance Company, Meritplan Insurance Company
and Newport Management Corporation (the QBE defendants) have moved to dismiss
plaintiff’s complaint on the following grounds: (1) plaintiff lacks standing with respect to
defendants QBE Holdings, Balboa and Newport; (2) the filed rate doctrine bars all of
plaintiff’s claims; and (3) plaintiff has failed to state a claim under federal or state law. Dkt.
#37. Defendants Bank of America Corporation, Bank of America, N.A., BAC Home Loans
Servicing, LP and Banc of America Insurance Services, Inc. (the Bank of America
defendants) similarly assert that plaintiff’s complaint should be dismissed as barred by the
filed rate doctrine and for failure to state a claim. Dkt. #41.
Plaintiff has alleged facts that elicit sympathy. It is understandable that she and
others in similar situations believe they have been treated unfairly. However, the law does
not support her lawsuit. The filed rate doctrine bars all of her claims except the breach of
contract and implied covenant of good faith and fair dealing claims against defendants Bank
of America, N.A. and BAC Home Loans related to backdating hazard insurance policies.
Those claims will be dismissed for failure to state a claim because backdating is a reasonable
practice under the terms of the mortgage contract. Given these rulings, it is unnecessary to
consider defendants’ remaining arguments related to standing and failure to state a claim.
The Bank of America defendants seek leave to attach to their motion plaintiff’s
mortgage agreement and several letters referred to in the complaint at ¶¶ 26-29, 44, 46-50
& 88. Dkt. #43. Because plaintiff has not opposed this request, the documents are referred
to in plaintiff’s complaint and are central to her claims, I will grant the motion. Burke v.
401 N. Wabash Venture, LLC, 714 F.3d. 501, 505 (7th Cir. 2013) (documents attached to
motion to dismiss are part of pleadings if referred to in plaintiff's complaint and central to
claim). I have not considered the documents that plaintiff filed regarding the findings of the
New York Department of Financial Services because they are not relevant to the issues to
be decided. Finally, I am denying as unnecessary the QBE defendants’ motion for oral
argument. Dkt. #40.
Accepting plaintiff’s well-pleaded facts as true and drawing all inferences in her favor,
DeGuille v. Camilli, 664 F.3d 192, 195 (7th Cir. 2011), I find from the complaint and the
relevant documents referred to in it that plaintiff has fairly alleged the following facts.
ALLEGATIONS OF FACT
A. The Force-Placed Insurance Industry
Standard form residential mortgage agreements require borrowers to purchase and
maintain hazard insurance (usually for flood, wind or fire damage) as a protection for the
lender’s interest in the secured property. Borrowers are permitted to choose their own
hazard insurance provider and policy, but coverage must equal or exceed the borrower’s
financial obligation to the lender. After the parties agree to a mortgage, the lender often
delegates various duties, such as monitoring the payment of insurance premiums, to a
subsidiary who services the loan. Monitoring is known as “insurance tracking,” a practice
that alerts the loan servicer if and when a borrower’s hazard insurance has lapsed. If a
borrower’s hazard insurance ends or if the lender and insurer dispute the coverage, the
standard mortgage agreement permits the lender to “force place” a hazard insurance policy
from a provider of its own choosing at the borrower’s expense. The mortgage loan servicer
is not required to maintain the borrower’s existing policy.
Government investigations into the force-placed insurance industry have brought to
light unlawful and abusive practices engaged in by some lenders, mortgage loan servicers and
force-placed insurance providers. Reports and testimony from fact-finding hearings held by
the New York Department of Financial Services in May 2012 revealed that collusion may
occur where a loan servicer has a pre-arranged agreement with an insurance provider to
purchase forced-placed policies at high-priced premiums, and in turn, the insurance provider
pays the servicer a fee, commission, rebate or other consideration. In addition to kickbacks,
lenders and loan servicers often have other financial incentives to force-place insurance, such
as receiving discounted or free insurance tracking. Borrowers are led to believe their high
premiums are necessary to cover the cost of protecting the lender’s interest in the property.
The lender does not disclose to the borrower the pre-arranged agreements between the
lenders, servicers and insurance providers.
B. The Parties and Their Relationships
Plaintiff Colleen Decambaliza is a resident of Fall Creek, Wisconsin. She has a
residential mortgage loan on her property. Dkt. #42-1. (The lender is listed as Countrywide
Home Loans, Inc., a company later acquired by defendant Bank of America, N.A.)
Defendant BAC Home Loans Servicing, LP serviced plaintiff’s and other class members’
loans for defendant Bank of America, N.A. by maintaining loan portfolios, mailing mortgage
statements, collecting mortgage payments, collecting and paying taxes, managing escrow
accounts, monitoring maintenance of hazard insurance and conducting foreclosures. Both
BAC Home Loans and Bank of America, N.A. were subsidiaries of defendant Bank of
America Corporation. That arrangement lasted until July 2011, when BAC Home Loans
merged with Bank of America, N.A. Defendant Banc of America Insurance Services, Inc. is
a wholly owned subsidiary of Bank of America, N.A. and is licensed in all 50 states.
Defendant Balboa Insurance Company provides force-placed insurance policies on
real estate located throughout the United States, including Wisconsin.
It was a
wholly-owned subsidiary of Countrywide Financial Corporation until July 1, 2008, when
defendant Bank of America Corporation acquired Balboa and its subsidiaries, defendants
Newport Management Company and Meritplan Insurance Company. Balboa and Meritplan
became subsidiaries of defendant BAC and affiliates of defendant Banc of America Insurance
From 2005 until January 12, 2010, Balboa operated under an agency agreement with
defendant Banc of America Insurance Services with respect to force-placed insurance
Balboa also operated as a subsidiary and force-placed insurer of Bank of
America, N.A. from 2008 to June 2011. Newport monitored Bank of America, N.A.’s loan
portfolio to identify loans on which the hazard insurance had lapsed or provided inadequate
coverage. Meritplan was a force-place insurer.
Defendant QBE Insurance Corporation is a subsidiary of defendant QBE Holdings,
Inc. and writes force-placed insurance for hazard and flood coverage throughout the United
States, including the state of Wisconsin. Defendant QBE Financial Institutional Risk
Services, Inc. (QBE First), another subsidiary of QBE Holdings, tracks and monitors
portfolios and manages the placement of force-placed insurance for QBE Insurance
Corporation. (QBE First was known as ZC Sterling Corporation until February 2010 and
then as Sterling National Corporation until April 2011.) QBE Holdings acquired QBE First
in December 2008.
On June 1, 2011, QBE Holdings purchased Balboa’s assets from Bank of America
Corporation, including Balboa’s employees, facilities, and its subsidiary, Newport
Although Bank of America Corporation retained Meritplan, the QBE
defendants manage all of Balboa’s force-placed business, receive Balboa’s premiums and
assume the risk of Balboa’s force-placed insurance. Balboa’s existing force-placed insurance
policies are in “run off” and are being transferred to QBE Insurance. Most Bank of America,
N.A. and Balboa employees working for the force-placed insurance program at the time of
sale became employed by QBE First or its affiliates. The three QBE defendants became Bank
of America, N.A.’s force-placed insurer on June 1, 2011.
C. Defendants’ Alleged Scheme
Defendant Bank of America, N.A. entered into exclusive agreements with defendant
Balboa, and later the QBE defendants and their subsidiaries and affiliates to force-place
high-priced hazard insurance according to terms incorporating or requiring ancillary services
and arrangements designed to generate additional profits over and above the cost of insuring
These profits were then steered to participants in the scheme.
relationship between the Bank of America and QBE defendants and their affiliates and
subsidiaries (including defendants Banc of America Insurance Services, Meritplan and
Newport) was a non-competitive and exclusive relationship in which all parties involved
benefitted at the expense of the borrower.
Through defendant Newport, defendant QBE FIRST monitored Bank of America,
N.A.’s loan portfolio to identify loans on which the hazard insurance had lapsed or provided
inadequate coverage. Once a lapsed insurance policy was identified, QBE FIRST and
Newport had Bank of America, N.A. force-place insurance by purchasing a policy from
defendants QBE Insurance, Balboa or Meritplan at the borrower’s expense, often out of the
borrower’s escrow funds.
Occasionally, defendants colluded to backdate force-placed
insurance premiums, which could result in duplicative coverage or coverage during periods
that posed no risk of loss. Purporting to be insurance brokers for Bank of America, N.A., the
QBE defendants and their affiliated enterprises acted as conduits by channeling the excess
amount of the premium among defendants as kickbacks in the form of fees, commissions,
rebates and other consideration for services not rendered.
D. Plaintiff’s Experience
As required by her mortgage agreement, dkt. # 42-1, ¶ 5, plaintiff had purchased a
hazard insurance policy from Secura Insurance Company for an annual premium of $329.75
that was paid out of her escrow. In December 2010, Secura notified plaintiff that defendant
Bank of America, N.A. had stopped paying the hazard insurance premiums. Bank of
America, N.A. attributed the error to Secura and offered plaintiff force-placed insurance
through defendant Meritplan for $523 per year. After plaintiff agreed, Bank of America,
N.A. notified her on September 13, 2011 that it had purchased the Meritplan insurance for
July 2011 to July 2012. Dkt. #42-4, at 5.
In the summer of 2012, Bank of America, N.A. told plaintiff that she had not been
paying enough on her mortgage and needed $7,000 to get her home out of foreclosure.
While reviewing her bank statements, plaintiff discovered that defendants had replaced her
Meritplan policy with a new force-placed insurance policy for the QBE defendants that cost
$1,950 per year. When she asked a Bank of America representative why the QBE premium
was so high, the representative continually responded that “lender-placed insurance is always
high,” leading plaintiff to believe erroneously that the high premium was necessary to cover
the cost of insuring the secured property. However, when plaintiff performed her own
research on hazard insurance premiums, QBE quoted her a yearly premium of $525.
A. Filed Rate Doctrine
Defendants assert that plaintiff’s federal and state claims must be dismissed under the
filed rate doctrine because the allegedly excessive premium rates were filed with and
approved by the Wisconsin Commissioner of Insurance. Wis. Stat. §§ 625.03 (applying
chapter to all types of insurance), 625.13(1) (requiring insurance companies to file a rate
with the Commissioner of Insurance within 30 days after becoming effective). Defendants
have the law on their side. The United States Supreme Court discussed the filed rate
doctrine in Keogh v. Chicago & N.W. Railway Company, 260 U.S. 156 (1922), addressing
the question whether a private shipper could attack common carrier rates under federal
antitrust law after the Interstate Commerce Commission had found the rates to be
non-discriminatory and reasonable. The Court held that he could not. “Unless and until
those rates are suspended, they are the legal rate.” Id. at 163. The Court explained that
rates set by the commission must be applied stringently to prevent unjust discrimination and
could not be varied or enlarged either by contract or by tort. Id. See also Arsberry v. Illinois,
244 F.3d 558, 562 (7th Cir. 2001) (filed rate doctrine forbids court from revising terms of
sale that public utility or common carrier has filed with agency that regulates carrier's
The doctrine is based both on “historical antipathy to rate setting by courts” and on
“a policy of forbidding price discrimination by public utilities and common carriers”:
A customer or competitor can challenge the tariff before the agency itself, and
if disappointed with the agency's response can seek judicial review, 47 U.S.C.
§§ 204(a)(2)(C), 402, but it cannot ask the court in any other type of suit . .
. to invalidate or modify the tariff. Nor can it seek damages based on the
difference between the actual tariff and a hypothetical lawful tariff. That
would require the court to determine the lawful tariff, and this is not regarded
as a proper judicial function.
Arsberry, 244 F.3d at 562 (citing Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 19-21 (2d
Cir. 1994)). Wisconsin courts agree and have applied the doctrine to rates established by
public utilities and other agencies, including the Commissioner of Insurance. Prentice v.
Title Ins. Co. of Minnesota, 176 Wis. 2d 714, 724, 725, 500 N.W.2d 658, 662-63 (1993)
(“the Wisconsin Insurance Code provides a regulatory remedy which bars a private
rate-related suit for damages”); Servais v. Kraft Foods, Inc., 2001 WI App 165, 246 Wis. 2d
920, 928, 631 N.W.2d 629, 633, aff'd, 2002 WI 42, 252 Wis. 2d 145, 643 N.W.2d 92.
Wis. Stat. § 625.22 grants the Commissioner of Insurance the power to disapprove
any rate not in accordance with § 625.11, which states that
(1) General. Rates shall not be excessive, inadequate or unfairly
discriminatory, nor shall an insurer charge any rate which if continued will
have or tend to have the effect of destroying competition or creating a
(2) Excessiveness. (a) Competitive market. Rates are presumed not to be
excessive if a reasonable degree of price competition exists at the consumer
level with respect to the class of business to which they apply. In determining
whether a reasonable degree of price competition exists, the commissioner
shall consider all relevant tests including:
The number of insurers actively engaged in the class of business;
The existence of rate differentials in that class of business;
Whether long-run profitability for insurers generally of the class of
business is unreasonably high in relation to its riskiness.
(b) Noncompetitive market. If such competition does not exist, rates are excessive
if they are likely to produce a long run profit that is unreasonably high in
relation to the riskiness of the class of business, or if expenses are
unreasonably high in relation to the services rendered.
Thus, Chapter 625 provides a remedy where insurers are earning unreasonably high profits
in relation to the risk of loss and where insurers’ claimed expenses are unreasonably high in
relation to the services they provide.
According to defendants, if the court were to evaluate the damages relating to the
alleged hazard insurance premium conspiracy, it would infringe upon the authority of the
Commissioner and result in an improper determination of the reasonableness of hazard
insurance premiums that could lead to discriminatory pricing for their insureds. Keeling v.
Esurance Ins. Co., 2012 WL 699580, *4 (S.D. Ill. Mar. 1, 2012). Plaintiff does not deny
that the premium rates at issue in this case were filed with the Commissioner of Insurance
and approved by him but argues that (1) her claims regarding improper backdating have
nothing to do with insurance rates; (2) the illegal kickbacks and charges are not premiums
and bear no relationship to any real risk of loss; and (3) the doctrine does not apply to noninsurance company defendants. I will address each of plaintiff’s arguments in turn.
1. Improper backdating
Plaintiff contends that defendants Bank of America, N.A. and BAC Home Loans
breached the mortgage contracts and the implied covenant of good faith and fair dealing by
backdating hazard insurance policies in order to charge mortgagees insurance premiums for
periods that had passed without damage to the property or claims arising out of damage to
Cpt., dkt. #1, ¶¶ 42, 118, 124(e-f).
For example, with respect to her
mortgage, plaintiff alleges that defendants force-placed a Meritplan policy on September 13,
2011 but backdated it to July 7, 2011, charged her premiums for those 67 days during which
she actually did not have insurance and then distributed the profits among themselves. In
response, the Bank of America defendants raise arguments related only to plaintiff’s failure
to state a claim, which will be addressed below.
I agree that the filed rate doctrine does not apply to plaintiff’s claims of backdating
to the extent that she is challenging defendants’ decision to force-place insurance during a
period in which no loss occurred. Ruling on plaintiff’s backdating claim requires a decision
about whether the coverage itself was appropriate and not a determination about the
reasonableness of the premium rate. Arsberry, 244 F.3d at 562-63 (not applying filed rate
doctrine where plaintiffs sought injunctive relief to dissolve arrangement that prevented
telephone company defendants from competing to file tariffs more advantageous to prison
inmates); Keeling, 2012 WL 699580, at *4 (doctrine did not apply to defendant's practice
of offering coverage and collecting premiums for insurance that, by its terms, could never be
2. Kickbacks are not premiums
Plaintiff contends that defendants manipulated the force-placed insurance process to
charge premiums that bear no relationship to any real risk of loss in order to share in illegal
kickbacks. According to plaintiff’s complaint, the kickbacks are included as part of the high
premiums. Cpt., dkt. #1 at ¶2 (“The QBE and Balboa Defendants would then pay a
percentage of the unreasonably high premium to the Bank of America Defendants as a cost
of maintaining the relationship, and not for any work the Bank of America Defendants
performed.”). Although plaintiff seeks to recoup the amount in excess of what she considers
a reasonable premium, she attempts to characterize her claims as a challenge to improper and
unlawful insurance practices and not to the reasonableness of the filed rate. In support, she
cites cases in which some district courts have found the doctrine inapplicable to claims that
defendants have manipulated the force-placed insurance process. Rothstein v. GMAC
Mortgage, LLC, Case No. 12-cv-03412 (S.D.N.Y. Sept. 30, 2013); Smith v. Suntrust
Mortgage Inc., 2013 WL 5305651, *5 (C.D. Cal. Sept. 16, 2013); Simpkins v. Wells Fargo
Bank, N.A., 2013 WL 4510166 (S.D. Ill. Aug. 26, 2013); Cannon v. Wells Fargo Bank
N.A., 917 F. Supp. 2d 1025 (N.D. Ca. 2013); Gallo v. PHH Mortgage Corp., 916 F. Supp.
2d 537, 545 (D.N.J. 2012); Kunzelmann v. Wells Fargo Bank, N.A., 2012 WL 2003337
(S.D. Fla. Jun. 4, 2012), but see Kunzelmann, 2013 WL 139913, *11-12 (S.D. Fla. Jan. 10,
2013) (noting its earlier decision limited because evidence surfaced that kickbacks were part
of and not in addition to high premiums); Abels v. JP Morgan Chase Bank, N.A., 678 F.
Supp. 2d 1273, 1277 (S.D. Fla. 2009).
In the cited cases, the courts focused on the lawfulness and purpose of the benefits
that defendants derived from the excessive premiums and not on what constitutes a
reasonable rate. However, several other courts have found this to be an illusory distinction
because the alleged fraud necessarily implicates the reasonableness of the filed rates. E.g.,
Singleton v. Wells Fargo Bank, N.A., Case No. 12CV216-NBB-SAA at 4 (N.D. Miss. Sept.
26, 2013); Roberts v. Wells Fargo Bank, 2013 WL 1233268, *13 (S.D. Ga. Mar. 27, 2013);
Kunzelmann, 2013 WL 139913, at *11-12 (filed rate defense must be considered when
plaintiff had conceded that unearned commissions were part of filed rate); Schilke v.
Wachovia Mortgage, FSB, 820 F. Supp. 825, 830 & 835 (N.D. Ill. 2011); In re Title
Insurance Antitrust Cases, 702 F. Supp. 2d 840, 860 (N.D. Ohio 2010) (antitrust claim
relating to title insurance kickback scheme); Steven v. Union Planters Corp., 2000 WL
33128256, *3 (E.D. Pa. Aug. 22, 2000); Morales v. Attorneys' Title Insurance Fund, Inc.,
983 F. Supp. 1418, 1428 (S.D. Fla. 1997) (Real Estate Settlement Procedures Act claim
alleging title insurance kickback scheme).
No general exception to the filed rate doctrine exists for fraudulent or wrongful
conduct. Courts regularly apply the filed rate doctrine to claims that insurers or other ratesetters have conspired to charge excessive rates to turn a profit. McCray v. Fidelity National
Title Insurance Co., 682 F.3d 229, 241 (3d Cir. 2012) (antitrust claim for fixing of title
insurance premiums); Wah Chang v. Duke Energy Trading & Marketing, LLC, 507 F.3d
1222, 1224 (9th Cir. 2007) (plaintiff alleged that defendants artificially increased its power
rates through anticompetitive and fraudulent manipulation of wholesale energy markets);
Hill v. BellSouth Telecommunications, Inc., 364 F.3d 1308, 1317 (11th Cir. 2004) (unfair
trade practices, fraud and other state law claims for telephone overcharges allegedly used to
meet defendant’s obligations to Universal Service Fund); Wegoland, 27 F.3d at 20 (RICO
action involving overcharges for telephone products and services); Taffet v. Southern Co.,
967 F.2d 1483 (11th Cir. 1992) (en banc); H.J. Inc. v. Northwestern Bell Telephone Co.,
954 F.2d 485 (8th Cir. 1992) (RICO claims alleging telephone company bribed utility
commission members to set higher rates); Roussin v. AARP, Inc., 664 F. Supp. 2d 412, 419
(S.D.N.Y. 2009) (breach of fiduciary claims for approving excessive health insurance
premiums for members); Korte v. Allstate Insurance Co., 48 F. Supp. 2d 647, 652 (E.D. Tex.
1999) (car insurance overcharges allegedly subsidized state-required risk pool).
The alleged kickbacks in this case are part of a premium that was approved by a
Allowing plaintiff to challenge them would contravene the non-
justiciability and non-discrimination purposes of the filed rate doctrine. In order to calculate
the amount of the alleged kickbacks, it would be necessary for this court to determine a
reasonable rate and subtract it from the premium. See, e.g., Northeastern Rural Electric
Membership Corp. v. Wabash Valley Power Association, Inc., 707 F.3d 883, 887-88 (7th
Cir. 2013) (“An award of damages would require a court to determine that the rate paid was
unreasonable. . .”); Medco Energi US, LLC v. Sea Robin Pipeline Co., __ F.3d __, 2013 WL
3316635, *4 (5th Cir. July 2, 2013) (although misrepresentation claims did not challenge
tariff, allowing damages would conflict with filed rate because alleged wrongdoing implicated
parties’ rights and liabilities under natural gas tariff); Hill, 364 F.3d at 1317 (“[E]ven if a
claim does not directly attack the filed rate, an award of damages to the customer that
would, in effect, result in a judicial determination of the reasonableness of that rate is
prohibited under the filed rate doctrine.”); Wegoland, 27 F.3d at 21 (any attempt by court
to determine improper profits would require determining what rate would have been
reasonable absent alleged improprieties and finding difference between two). Plaintiff also
would be paying an insurance rate different from that of other insureds if she were allowed
to recoup a portion of her forced-placed insurance premiums. Northeastern Rural, 707 F.3d
at 888 (“any damages paid in such a suit would effectively alter the rate Northeastern paid
for electricity”); Wah Chang, 507 F.3d at 1226; Hill, 364 F.3d at 1316-17ern.
Plaintiff’s challenges should be addressed by the Wisconsin Commissioner of
Insurance, who is responsible for making sure that insurers do not earn unreasonably high
profits in relation to the risk of loss or claim unreasonably high expenses in relation to the
services that they provide. Wis. Stat. Ch. 625; see also Steven, 2000 WL 33128256, at *3
(“The regulatory system governing the forced placed hazard insurance rates at issue is
comprehensive, including filing, rate calculation, rate review, and enforcement of rules.
Therefore, under the filed rate doctrine, a question regarding reasonable rates should be
addressed to the Department of Insurance.”).
3. Non-insurance company defendants
Plaintiff contends that the Bank of America defendants, QBE Holdings and QBE
FIRST cannot assert the filed rate doctrine because they are not insurance companies and
giving them the benefit of the doctrine would encourage fraudulent activity by entities not
subject to extensive (or any) regulatory oversight. In support, she relies on the decisions in
Abels, 678 F. Supp. 2d at 1277 and Cannon, 917 F. Supp. 2d 1025. When presented with
this argument, the court in Abels noted that
Indeed, the purpose of the filed rate doctrine is to “‘(1) preserve the regulating
agency's authority to determine the reasonableness of rates; and (2) insure that
the regulated entities charge only those rates that the agency has approved.’”
Therefore, Plaintiffs argue, because the bank is not subject to the extensive
administrative oversight that insurance companies are, applying the filed rate
doctrine in this instance would not serve either purpose.
The Court finds that Plaintiffs have the better argument. Plaintiffs are not
complaining that they were charged an excessive insurance rate, they are
complaining that the defendant bank acted unlawfully when it chose this
particular insurance company and this particular rate. Indeed, the Supreme
Court “has emphasized the limited scope of the filed rate doctrine to preclude
damage claims only where there are validly filed rates.” Florida Municipal
Power Agency v. Florida Power & Light Company, 64 F.3d 614, 617 (11th
Cir. 1995). See also In re Managed Care Litigation, 150 F. Supp. 2d 1330,
1344 (S.D. Fla. 2001) (holding that the filed rate doctrine did not apply
where there was no extensive administrative oversight). Accordingly, the filed
rate doctrine does not bar Plaintiffs' case.
Abels, 678 F. Supp. 2d at 1277. This reasoning was persuasive to the court in Cannon, 917
F. Supp. 2d at 1038. The court also cited the 2012 decision in Kunzelmann, which
distinguished claims alleging unearned kickbacks from claims challenging the reasonableness
of the filed rate. Cannon, 917 F. Supp. 2d at 1038. However, these arguments are nothing
more than a repackaged version of the arguments plaintiff raised in conjunction with her
Plaintiff’s concern that the non-insurer defendants are not subject to administrative
oversight is misplaced. The crux of plaintiff’s claims against the non-insurer defendants is
that they conspired with the insurer defendants to have her pay excessive premiums so that
they could share in the illicit profits. Although the Commissioner of Insurance does not
regulate mortgage lenders, it does regulate the premium rate ultimately charged to plaintiff.
Try as she might, plaintiff cannot avoid the fact that she is asking this court to determine
what rate the insurance company defendants should have charged instead of the rates they
did charge. Wah Chang, 507 F.3d at 1226. That is exactly what the filed rate doctrine
forbids. As defendants point out, other courts agree and have applied the filed rate doctrine
to claims brought against parties that did not file the rate at issue. E.g., Roussin, 664 F.
Supp. 2d at 419 (doctrine bars plaintiff’s claims seeking relief—albeit indirectly—for injury
allegedly caused by rate on file with regulatory agency); Hooks v. American Medical Security
Life Insurance Co., 2008 WL 3911130, *6 (W.D.N.C. Aug. 19, 2008) (applying doctrine
to claims brought against non-profit holder of group health insurance policy that made
insurance available to members but was not insurer and did not file rates at issue); Steven,
2000 WL 33128256, at *3 (applying doctrine to force-placed insurance claims against
mortgage servicer). The Court of Appeals for the Seventh Circuit has rejected attempts to
avoid application of filed rate doctrine on the ground that a regulatory agency did not
provide sufficient oversight. Goldwasser v. Ameritech Corp., 222 F.3d 390, 402 (7th Cir.
2000) (rejecting argument that state public utility commissions nominally oversee
rate-setting and rarely exercise their muscle).
Accordingly, I find that the filed rate doctrine bars all of plaintiff’s federal and state
C. Failure to State a Claim
The Bank of America defendants argue that plaintiff cannot state a claim for breach
of contract and the implied covenant of good faith and fair dealing because the mortgage
contract that she signed allows these defendants to determine the period of insurance.
Plaintiff’s mortgage provides that “[t]his insurance shall be maintained in the amounts
(including deductible levels) and for the periods that Lender requires.” Dkt. #42-1 at ¶ 5.
On its face, the mortgage places no limits on the periods for which the lender may require
insurance. However, plaintiff contends that there are implied limits through the covenant
of good faith and fair dealing that require defendants to act reasonably. She also argues that
the backdated term of the force-placed policy was not a contract of insurance because no risk
of loss shifted to defendants. Hillegass v. Landwehr, 176 Wis. 2d 76, 81, 499 N.W.2d 652,
654-55 (1993) (critical element that defines contract for insurance "is a contractual shifting
of risk in exchange for premiums"); Wis. Stat. § 600.03(25)(a)1 (defining "insurance" as
including "[r]isk distributing arrangements providing for compensation of damages or loss
through the provision of services or benefits in kind rather than indemnity in money.").
According to defendants, it is reasonable to backdate hazard insurance to the date of
the lapse when no one knew whether a loss had occurred during the lapsed period. In
support, they cite the decisions in Schilke, 820 F. Supp. 2d at 834 (rejecting backdating
allegations because lenders who backdate insurance coverage appropriately do so to “ensure
that [their] interest in the property [is] protected with continuous, adequate insurance
coverage”); Cannon v. Wells Fargo Bank, N.A., 2013 WL 3388222, *5 (N.D. Cal. July 5,
2013) (“Plaintiffs failed to explain . . . why it would be unreasonable to backdate flood
insurance given that, e.g., some damage may not be readily apparent (such as mold).”);
LaCroix v. U.S. Bank, N.A., 2012 WL 2357602, *5 (D. Minn. June 20, 2012) (“Backdating
policies, however, ensures that the property is continuously covered in the event that a loss
occurs during a period of insufficient coverage.”); and Webb v. Chase Manhattan Mortgage
Corporation, 2008 WL 2230696, *19 (S.D. Ohio May 28, 2008) (granting summary
judgment because “Chase had to ensure that the property was continuously covered in the
event that a loss had occurred during the lapse in insurance coverage because no inspection
of the property was done”).
(I have not considered defendants’ reference to recent
regulations promulgated by the Bureau of Consumer Financial Protection because those
regulations do not become effective until January 10, 2014, well after the period at issue in
Contrary to plaintiff’s assertions, the backdated insurance was not worthless or
unreasonable. At the time it was purchased, a claim still could have been made with respect
to some unknown damage to the property.
In any event, the mortgage contract also
expressly allows the lender to obtain insurance coverage at the borrower’s expense for any
period that it deems appropriate. Accordingly, I am dismissing the backdating claims for
failure to state a claim.
IT IS ORDERED that
1. The motions to dismiss filed by defendants QBE Holdings, Inc., QBE Insurance
Corporation, QBE Financial Institutional Risk Services, Inc., Balboa Insurance Company,
Meritplan Insurance Company and Newport Management Corporation, dkt. #37, and
defendants Bank of America Corporation, Bank of America, N.A., BAC Home Loans
Servicing, LP and Banc of America Insurance Services, Inc., dkt. #41, are GRANTED and
plaintiff’s complaint is DISMISSED;
2. The QBE defendants motion for oral argument, dkt. #40, is DENIED;
3. The Bank of America defendants’ motion for leave to file documents, dkt. #43,
is GRANTED; and
4. The clerk of court is directed to enter judgment for defendants and close this case.
Entered this 25th day of October, 2013.
BY THE COURT:
BARBARA B. CRABB
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