This is the next in a continuing series of articles reprinted from the manuscript of the author's article published by Westlaw Publishing Co., "Force-placed, Lender-placed Insurance Class Actions: Is the Lender Placement of Insurance Authorized by Law, Or Simply Beyond the Reach of the Courts?", 35 Insurance Litigation Reporter 221 (2013) © 2013 Thomson Reuters. Installments in this series will alternately be presented here and on Insurance Claims Bad Faith Law Blog. Permission to reprint from the author's manuscript is given by John K. DiMugno, Esquire, Editor-in-Chief of ILR, by Thomson Reuters Westlaw, and by the author.
In this installment, we continue our series by examining the most frequently alleged claims and causes of action in force-placed insurance cases.
The Most Frequently Alleged Claims and Causes of Action in the force-placed insurance cases.
* * *
4. Breach of Fiduciary Duties. This claim does not appear to be alleged frequently in force-placed insurance cases. When it is alleged and when it is attacked by a motion to dismiss for failure to state a claim, an alleged breach of fiduciary duties claim tends to rise and fall with other claims based on the same common nucleus of operative facts, so to speak.
A claim in which a plaintiff borrower alleged that her lender "had a fiduciary duty in connection with managing her escrow account," which duty was breached when the lender allegedly charged her for "excessive" insurance "and related commissions ... in an act of self-dealing," stated a claim sufficient to withstand a Rule 12(b)(6) motion to dismiss. "Our discussions of the other claims inevitably lead to the conclusion that the dismissal of the fiduciary duty claim also was premature."[1]
In contrast, the plaintiffs in another case failed to state a claim for alleged breach of fiduciary duties under Arkansas law, for two reasons, one legal and the other factual. The legal reason for decision was that the Court in that case was not provided with any authority "that the mere maintenance of an escrow account for the payment of routine fees and expenses creates a fiduciary duty and gives rise to a relationship that is 'more than a debtor-creditor relationship' under Arkansas law."[2]
Moreover, in any event, the plaintiffs in that case did not allege a universally required fact element of a fiduciary relationship in that case: They did not allege a relationship of trust.[3]
To be continued. Please Read The Disclaimer.
[1] Lass v. Bank of America, N.A., 695 F.3d 129, 141 (1st Cir. 2012).
[2] Lane v. Wells Fargo Bank, N.A., 2013 WL 269133 *11 (N.D. Cal. January 24, 2013). Accord as to Texas law: McKenzie v. Wells Fargo Home Mort., Inc., 2012 WL 5372120 *22 (N.D. Cal. October 30, 2012; Spero, USMJ).
[3] Lane v. Wells Fargo Bank, N.A., 2013 WL 269133 *11 (N.D. Cal. January 24, 2013). Accord as to New Mexico law: McKenzie v. Wells Fargo Home Mort., Inc., 2012 WL 5372120 *23 (N.D. Cal. October 30, 2012; Spero, USMJ).