I can’t recall any decision in which a judge openly compared his job to that of a tarot card reader, but a federal jurist in Florida recently did exactly that—in the context of a class action over lender-placed insurance (LPI). The prediction at hand was whether the regional appellate tribunal, the Eleventh Circuit Court of Appeals, would accept or reject the filed-rate doctrine as a defense to LPI lawsuits.
In that case, Fowler v. Caliber Home Loans, Inc., the plaintiffs alleged what numerous other borrowers have in similar cases: that they were compelled to pay excessive premiums for LPI (or “force-placed” insurance) when they allowed their homeowners coverage to lapse and that the overcharge was due to illegal and unfair kickbacks between their lender and the LPI insurer.
The court in Fowler noted that two federal circuits, the Second Circuit in Rothstein v. Balboa Insurance Company and the Third Circuit in Alston v. Countrywide Financial Corporation, have reacted opposite conclusions about whether the filed-rate doctrine bars LPI claims. That doctrine holds that a consumer cannot challenge in court a monetary rate that was approved by public regulatory authorities, which many LPI premiums are. Instead, any attack on those rates must take place in the regulatory context. The main dispute in these debates has been whether the borrowers are attacking the rates themselves (which would trigger the doctrine) or the lenders’ conduct (which supposedly would not trigger the doctrine).
Fowler ultimately sided with those courts finding that the filed-rate doctrine precludes LPI causes of action like these. Rothstein, the court found, was much more thorough and persuasive on these points. That contrasts with the analysis in Alston, which was more of an afterthought. Claiming that these lawsuits do not attack the reasonableness of filed rates is sophistry, and courts are beginning to reach a long overdue consensus on that issue.
A different case, Patel v. Specialized Loan Servicing, LLC, is currently pending before the Eleventh Circuit. Fowler’s detailed analysis is likely to play at least some role in that decision. This may lead to the much needed break that lenders and insurers have been looking for.