In Johnson v. Green Tree Servicing LLC, No. 3:15-cv-18-MPM-SAA, 2015 WL 2452680 (N.D. Miss. May 22, 2015), notice of appeal filed (May 26, 2015; unreported), a Federal District Judge applied the so-called filed rate doctrine in an insurance case.
The filed rate doctrine first surfaced in utilities cases. Under the filed rate doctrine, if a ratepayer challenges the rate charged by a utility and the rate has previously been approved by a government agency of competent jurisdiction, then the rate is unassailable and the ratepayer’s challenge to the rate has to be dismissed.
Unfortunately, importing the ‘doctrine’ into the insurance arena also imported some problems. In this case, for example, the Court applied the filed rate doctrine as a bar to claims of unlawful, unearned kickbacks against a mortgage servicer rather than claims which challenged the rates of the insurance company that issued the insurance force-placed on behalf of the lender in that case. In the words of the Court itself, “[t]he rate Green Tree charged Johnson was filed with and approved by the Mississippi Insurance Commission.” Johnson v. Green Tree Servicing LLC, No. 3:15-cv-18-MPM-SAA, 2015 WL 2452680 *2 (N.D. Miss. May 22, 2015), notice of appeal filed (May 26, 2015; unreported). [Emphasis added.] Actually, the Complaint alleged that the lender force-placed insurance was issued by Standard Guaranty Insurance Company. Complaint, ¶ 71 in Dkt. No. 1 (N.D. Miss. Case No. 3:15-cv-18-MPM-SAA): Download Johnson v. Green Tree Servicing LLC Complaint, Dkt. No. 1 filed 01.28.15 (N.D. Miss. Case No. 3.15.cv.18.MPM.SAA). The rate filing would have been done by the insurance company of course—here, Standard Guaranty—and not by the mortgage servicer, in this case, Green Tree.
The Court’s observation that the insurance rate approved by the Mississippi Insurance Commission “included the alleged ‘kickbacks’ and other costs,” Johnson v. Green Tree Servicing LLC, No. 3:15-cv-18-MPM-SAA, 2015 WL 2452680 *2 (N.D. Miss. May 22, 2015), notice of appeal filed (May 26, 2015; unreported), seems to be unsupported by the record on Green Tree’s motion to dismiss.
Parenthetically, it also seems highly unlikely that the alleged kickbacks were included in the rate filing, for that would have required Standard Guaranty to know the amount of kickbacks and report them to the Insurance Commissioner as a part of the rate for which Standard Guaranty was requesting government approval.
The great majority of Courts limit the availability of the filed rate doctrine to the insurance company which filed the rate request. Dennis J. Wall, “Lender Force-Placed Insurance Practices” § 6.2, pp. 212-15 (American Bar Association 2015).
The Court also held that the complaint "failed to state a claim for breach of contract or bad faith." This ruling was based on a holding that "[n]othing in the mortgage instrument prohibits Green Tree from earning commissions from FPI [force-placed insurance]." Johnson v. Green Tree Servicing LLC, No. 3:15-cv-18-MPM-SAA, 2015 WL 2452680 *3 (N.D. Miss. May 22, 2015), notice of appeal filed (May 26, 2015; unreported). [Emphasis added.]
With respect, this statement misses the mark. The question for both breach of contract and bad faith is whether the mortgage servicer defendant in this case was authorized to claim kickbacks-commissions, which the complaint alleges it was not authorized by the contract to do. Again with respect, that allegation should have settled the issue presented by Green Tree's motion to dismiss for failure to state a claim.
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