A federal appeals court has rejected class-action lawsuits that claimed Florida homeowners were charged too much for property insurance purchased for them by mortgage companies.
The lawsuits dealt with “force-placed insurance,” coverage that lenders buy when borrowers don’t purchase property insurance. The costs of force-placed insurance are then passed along to borrowers.
In 2015, four Florida residents and a Pennsylvania resident filed class-action lawsuits against mortgage servicing companies Caliber Home Loans and Specialized Loan Servicing, along with American Security Insurance Co. (ASIC), according to a report by Daily Business Review. The lawsuits alleged that the companies engaged in a scheme to inflate the costs of force-placed insurance. The suits alleged that Caliber and Specialized Loan Servicing received rebates from ASIC, but failed to pass the savings on to borrowers, Daily Business Review reported.
The lawsuits also alleged breach of contract, racketeering, and violations of the Federal Truth in Lending Act and the Florida Deceptive and Unfair Trade Practices Act.
However, in a 2-1 decision, the Eleventh Circuit Court of Appeals upheld a US district court decision to dismiss the cases. According to the court, state regulators approved the rates charged by ASIC. The decision also cited a legal concept known as the filed-rate doctrine, which seeks to keep courts out of rate-setting decisions, according to Daily Business Review.
“The plain language of the complaints … shows that the plaintiffs are challenging the reasonableness of ASIC’s premiums; and since these premiums are based upon rates filed with state regulators, plaintiffs are directly attacking those rates as being unreasonable as well,” Judge Danny J. Boggs wrote in the court’s majority opinion. “…Because the plaintiffs should be understood as meaning what they say, we find that they have challenged ASIC’s filed rate. As such, there can be no doubt that their causes of action are barred by the filed-rate doctrine.”
