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.
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5. Unconscionability. Courts have doubts about whether the remaining 'equitable' claim, so to speak, in the force-placed insurance cluster of cases is really a claim at all. Even if it is a claim or cause of action, one Court has pointed out in a particular case that it could not grant money damages because in that case the plaintiff borrowers were asking for a "refund" of all "hidden profits or other financial benefits". Therefore the Court in that case granted a motion to dismiss the plaintiffs' "unconscionability" claim in a case involving Florida substantive law.[1]
However, in another case involving Florida substantive law, the defendant's motion to dismiss the plaintiffs' unconscionability claim was denied under similar allegations. A different Federal Judge held in a case filed in the same District Court that Florida law recognizes an unconscionability claim where the plaintiffs demonstrate both "procedural" and "substantive" unconscionability. Since the plaintiffs in that case established both "procedural unconscionability"[2] and "substantive unconscionability,"[3] the defendant's motion to dismiss was denied.
6. Conversion. This is the last of the torts, so to speak, the last of the common law causes of action or equitable claims which are most frequently alleged in putative class action force-placed insurance cases. It has survived Rule 12(b)(6) motions to date which have been filed in a pair of Northern District of California cases decided in January, 2013, in which the Courts applied Arkansas law[4] and Florida law,[5] respectively, and with the same result. In both cases, the tort of conversion was viewed by two different District Judges as being outside of the contract, in one case because the plaintiffs' "kickback" allegations raised claims involving fact issues which could not be determined short of trial or summary judgment,[6] and in the other case for two reasons, first because the conversion claim was alleged against a mortgage servicer which was not a party to the mortgage contract, and second because "the tort by Wells Fargo is independent of the breach of contract as the contract does not on its face address kickbacks or backdating."[7]
A conversion claim in a first-party case did not survive a Rule 12(b)(6) motion in the District of Columbia, however.[8] The District Judge gave one, or perhaps two, reasons for its ruling dismissing the conversion claim alleged in that case. First, "[t]he Plaintiff does not allege that the Defendants exercised unlawful control over her personal property, nor does she articulate a right to any specific identifiable fund of money. The Plaintiff fails to state a claim for conversion."[9] Later in the same opinion, the Court summarized all its holdings, and in particular with respect to the Court's holding with respect to dismissal of the alleged conversion claim in that case, the Court stated that "[a] claim for conversion is unavailable because the Plaintiff's allegations concern only the payment of money."[10]
[1] Williams v. Wells Fargo Bank N.A., 2011 WL 4901346 *4 (S.D. Fla. October 14, 2011).
[2] "Procedural unconscionability is satisfied here because of the disparity in bargaining power between Plaintiffs and Defendant." Abels v. JPMorgan Chase Bank, N.A., 678 F. Supp. 2d 1273, 1279 (S.D. Fla. 2009).
[3] "Regarding substantive unconscionability, Plaintiffs have alleged sufficient facts showing that, had they known the full extent of Defendant's permissible conduct under the contract, no reasonable person would have agreed to it. Whether or not a reasonable person would have actually agreed to it is a factual question that cannot be decided on a motion to dismiss." Abels v. JPMorgan Chase Bank, N.A., 678 F. Supp. 2d 1273, 1279-80 (S.D. Fla. 2009).
[4] Lane v. Wells Fargo Bank N.A., 2013 WL 269133 *11 (N.D. Cal. January 24, 2013).
[5] Cannon v. Wells Fargo Bank N.A., 2013 WL 132450 *24 (N.D. Cal. January 9, 2013).
[6] Lane v. Wells Fargo Bank N.A., 2013 WL 269133 *11 (N.D. Cal. January 24, 2013). The same plaintiffs failed, however, to adequately plead a conversion claim based on a mere conclusory allegation of "improper backdating of insurance procured for plaintiffs' property" [emphasis added], and failed to plead any claim based on such an allegation, the Court held in that case. "Plaintiffs have not, however, sufficiently alleged that Wells Fargo engaged in improper backdating of insurance procured for plaintiffs' property." Lane v. Wells Fargo Bank N.A., 2013 WL 269133 *11 (N.D. Cal. January 24, 2013).
[7] Cannon v. Wells Fargo Bank N.A., 2013 WL 132450 *24 (N.D. Cal. January 9, 2013).
[8] Cannon v. Wells Fargo Bank, N.A., 2013 WL 764964 *19 (D.D.C. March 1, 2013).
[9] Cannon v. Wells Fargo Bank, N.A., 2013 WL 764964 *19 (D.D.C. March 1, 2013).
[10] Cannon v. Wells Fargo Bank, N.A., 2013 WL 764964 *19 (D.D.C. March 1, 2013).