Montoya v. PNC Bank, N.A.
| Decision Date | 27 August 2014 |
| Docket Number | CASE No. 14-20474-CIV-GOODMAN |
| Parties | ENRIQUE MONTOYA and NEYSER COLONIA, Plaintiffs, v. PNC BANK, N.A., et al., Defendants. |
| Court | U.S. District Court — Southern District of Florida |
[CONSENT CASE]
In their 1991 hit song "Wind of Change," the German rock band Scorpions explained that the future is "blowing with the wind of change."1 Twenty-three years later, then-Chief United States District Judge Federico A. Moreno, in an order approving a class action settlement in a similar case, described as "significant" the "headwinds" created by two recent appellate decisions rejecting claims brought in connection with force-placed insurance coverage. Saccoccio v. JP Morgan Chase Bank, N.A., 297 F.R.D. 683, 693 (S.D. Fla. 2014). In fact, Judge Moreno noted that the legal headwinds suggest that "it is not at all clear that Plaintiff would have succeeded at trial." Id. at 692. But regardless of whether class force-placed insurance claims are now confronting nasty headwinds or turbulent winds of change, there is no doubt thatrecent federal appellate decisions have changed the climate for Plaintiffs' class action attorneys pursuing force-placed insurance claims.
As outlined below, Plaintiffs' force-placed insurance claims confront a blustery legal atmosphere, which explains why the Court is dismissing a few of their claims now at the motion-to-dismiss stage -- and simultaneously noting that some of the remaining claims will need to weather the legal squalls which will later blow their way again in the inevitable summary judgment motions. Other counts have survived the motions to dismiss, while most of the dismissed counts have been dismissed without prejudice.
Homeowners are often required by the terms of their mortgage contracts to maintain insurance coverage on the properties securing their loans. When the homeowner does not maintain the insurance, the lender is authorized by the mortgage contract to purchase new insurance to cover its interest in the property. Lenders do this by contracting with insurance providers. This is what is commonly referred to aslender-placed insurance ("LPI"), which is sometimes deemed (usually by plaintiffs) as force-placed insurance. This case is one of many3 putative civil class actions that have been filed around the country against various lenders and servicers regarding their LPI programs. Many of these suits, like the one here, allege that lenders and their insurance providers have colluded together to create a nefarious scheme of kickbacks that artificially inflate LPI rates. [ECF No. 42, pp. 2-4]. According to Plaintiffs, this scheme results in LPI premiums that can be up to ten times greater than the market rate available to the unsuspecting homeowner. [ECF No. 42, ¶ 6].
Here, named Plaintiffs Enrique Montoya ("Montoya"), a Florida resident, and Neyser Colonia ("Colonia"), a New Jersey resident (collectively, "Plaintiffs"), assert that Defendant lenders PNC Bank, N.A. ("PNC") and PNC Mortgage ("PNC Mortgage") and Defendants Assurant, Inc. ("Assurant") and American Security Insurance Company ("ASIC") are liable to them for damages concerning the LPI placed on their homes because alleged "kickbacks" inflated the price of the LPI premiums that Plaintiffs were ultimately charged. [ECF No. 42]. Plaintiffs allege various theories ofliability, such as breach of contract, equity, tort, fraud, and state and federal statutory claims.
What makes this LPI case factually unique is that the LPI premiums Montoya paid were actually lower than the ones he purchased himself on the open market. Colonia's LPI premiums were at first more than the market rate insurance he obtained on his own, but his LPI premiums also ended up being slightly less than the market rate.
Montoya acknowledges that his mortgage agreement required him to maintain insurance on his home and that if he failed to do so, PNC was expressly authorized to purchase LPI and to charge him for the LPI premiums. [ECF No. 42, ¶ 46]. In particular, Montoya's mortgage agreement provides as follows:
Borrower [Montoya] shall keep the improvements now existing or hereafter erected on the property insured . . . If Borrower fails to maintain any of the coverage described above [i.e., insurance], Lender [PNC] may obtain insurance coverage, at Lender's option, and Borrower's expense . . . Borrower acknowledges that the costs of the [Lender's] insurance coverage so obtained might significantly exceed the cost of insurance the Borrower could have obtained.
[ECF No. 56-2, § 5 (emphasis added)].
Montoya's insurance lapsed on his Miami, Florida property on May 4, 2008. [ECF No. 56-4]. He had been paying the Gulfstream Property and Insurance Company an annual premium of $6,170.00, including a $5,981.00 annual premium for dwelling coverage of $164,075. [ECF No. 56-5]. Following the lapse, PNC's predecessor-in-interest, National City Mortgage Company ("National City"), sent a disclosure letter to Montoya that stated, among other things:
If we do not receive evidence of continuous . . . insurance coverage it will be necessary for us to secure coverage to protect our interest at your expense. The cost of such coverage may be substantially higher than the amount you would normally pay . . . [Our] [affiliates may earn commission or income in conjunction with the placement of this coverage.
[ECF No. 56-6 (emphasis added)].
After not hearing from Montoya or receiving any evidence of insurance, National City purchased LPI for Montoya's property that provided $164,100 of dwelling coverage for an annual premium of $3,099.09 -- nearly $3,000 less than the $5,981.00 premium that Montoya had paid for the expired Gulfstream Policy.4 [See ECF No. 56-8]. The one-year policy, which was written by ASIC, was made effective retroactive to May 4, 2008, the date of the Gulfstream Policy's lapse, and National City charged Montoya's escrow account for the amount of the LPI premium. [Id.].
The LPI on Montoya's property was renewed annually, at roughly the same premium and dwelling coverage amount. [ECF Nos. 56-9 ($3,075.07); 56-10 ($3,075.07); 56-11 ($3,240.56); 56-12 ($3,254.16)]. In May 2012, Montoya notified PNC that he had obtained his own insurance coverage from Universal Property and Casualty Insurance Company, effective May 9, 2012, with a dwelling coverage amount of $264,948 at anannual premium of $5,849.00. [ECF No. 56-14].
Montoya's own insurance was short lived. In October 2012, PNC received notice that Universal was canceling Montoya's policy and declaring it void ab initio, on the basis that there had been an "[i]ncorrect statement on the application." [ECF No. 56-16]. With no insurance on the property, PNC again dispatched notice letters to Montoya and eventually purchased LPI from ASIC, effective May 9, 2012, providing dwelling coverage in the amount of $264,948 (the identical dwelling coverage amount as the now-void Universal policy) at an annual premium of $5,177.40 -- nearly $700 less than Universal's dwelling coverage premium. [ECF Nos. 56-17; 56-18; 56-19]. In 2013, after providing advanced notice, PNC increased the LPI dwelling coverage to $272,631, which raised the premium to $5,326.76 --- still significantly less than what Montoya was able to secure on the market on his own. [ECF Nos. 56-20; 56-21].
Like Montoya, Colonia's mortgage agreement required him to maintain insurance and authorized the lender to purchase insurance if he failed to do so. [ECF No. 56-23, §§ 2, 4, 7]. Colonia's insurance lapsed on his Elizabeth, New Jersey property on February 9, 2013. [ECF No. 56-26]. The lapsed Scottsdale Insurance Company policy had provided Colonia with $585,000 of property coverage at an annual premium of $4,175.00. [ECF No. 56-27]. When his Scottsdale policy lapsed, Colonia, like Montoya, received a disclosure letter that stated, among other things:
Because hazard insurance is required on your property, we [PNC] plan to buy insurance for your property. . . . The insurance we buy: may be more expensive than the insurance you can buy yourself . . . The insurance we obtain . . . is primarily for the benefit of PNC . . . if we purchase insurance for you, an affiliate of PNC . . . may benefit.
[ECF No. 56-28 ()].
On February 6, 2014, after sending Colonia several disclosure letters regarding LPI and receiving no evidence of insurance coverage, PNC purchased LPI for his property at an annual total charge of $5,577.75 for $585,000 of coverage, effective back to February 9, 2013 -- the Scottsdale policy's cancelation date -- and charged that amount to Colonia's escrow account. [ECF Nos. 56-28; 56-29; 56-30]. Unlike Montoya, Colonia's LPI premium was approximately $1,400 more than the insurance he obtained on his own. The one-year policy was renewed on March 27, 2014, effective to February 9, 2014, for the same dwelling coverage but for a significantly reduced premium: $4,170.00 -- five dollars less than the premium on Colonia's expired Scottsdale policy. [ECF No. 56-31].
In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court must take all well-pleaded facts in the plaintiff's complaint and all reasonable inferences drawn from those facts as true. Jackson v. Okaloosa Cnty, Fla., 21 F.3d 1531, 1534 (11th Cir. 1994). "A pleading must contain 'a short and plain statement of the claim showing that the pleader is entitled to relief.'" Ashcroft v. Iqbal, 556 U.S. 662, 677-78(2009) (quoting Fed. R. Civ. P. 8(a)(2)). While detailed factual allegations are not always necessary in order to prevent dismissal of a complaint, the allegations must "'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). While a court must accept as true ...
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