Wilson v. EverBank, N.A.

• Decision Date: 05 January 2015
• Docket Number: Case No. 14–CIV–22264.
• Parties: Dwight WILSON, Jesus A. Avelar–Lemus, Jessie Cross, and Mattie Cross on behalf of themselves and all others similarly situated, Plaintiff, v. EVERBANK, N.A., Everhome Mortgage, Assurant, Inc., Standard Guaranty Insurance Company, and American Security Insurance Company, Defendants.
• Court: U.S. District Court — Southern District of Florida

77 F.Supp.3d 1202

Dwight WILSON, Jesus A. Avelar–Lemus, Jessie Cross, and Mattie Cross on behalf of themselves and all others similarly situated, Plaintiff

v.EVERBANK, N.A., Everhome Mortgage, Assurant, Inc., Standard Guaranty Insurance Company, and American Security Insurance Company, Defendants.

Case No. 14–CIV–22264.

United States District Court, S.D. Florida.

Signed Jan. 5, 2015.

Entered Jan. 6, 2015.

Aaron Samuel Podhurst, John Gravante, III, Matthew Weinshall, Peter Prieto, Podhurst Orseck, P.A., Miami, FL, John Scarola, Searcy Denney Scarola Barnhart & Shipley, West Palm Beach, FL, Darnley D. Stewart, Giskan Solotaroff Anderson & Stewart LLP, New York, NY, Howard Mitchell Bushman, Lance August Harke, Sarah Clasby Engel, Harke Clasby & Bushman LLP, Miami Shores, FL, Randall Seth Crompton, Eric D. Holland, Holland, Groves, Schneller & Stolze, St. Louis, MO, Thomas A. Tucker Ronzetti, Robert J. Neary, Rachel Sullivan, Adam M. Moskowitz, Kozyak Tropin & Throckmorton, P.A., Coral Gables, FL, for Plaintiff.

David D. Christensen, Irene C. Freidel, K & L Gates LLP, Boston, MA, Paul F. Hancock, Olivia Rae Waters Kelman, K & L Gates LLP, Farrokh Jhabvala, Franklin G. Burt, Landon King Clayman, Todd Matthew Fuller, Carlton Fields Jorden Burt PA, Miami, FL, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

BETH BLOOM, District Judge.

THIS CAUSE is before the Court on the Motions to Dismiss Plaintiffs Dwight Wilson, Jesus A. Avelar–Lemus, Jessie Cross and Mattie Cross' (“Plaintiffs”) Class Action Complaint, ECF No. [1] (the “Complaint”), filed by Defendants EverBank and Everhome Mortgage (together, “EverBank” and EverBank's “Motion to Dismiss”, ECF No. [32] ), and Defendant American Security Insurance Company (“ASIC” and ASIC's “Motion to Dismiss”, ECF No. [36] ), Defendant Standard Guaranty Insurance Company (“SGIC” and SGIC's “Motion to Dismiss”, ECF No. [37] ), and ASIC and SGIC's separate Motion to Dismiss for lack of subject matter jurisdiction (the “Motion on Jurisdiction”, ECF No. [64] ). The Court has reviewed the Motions, all supporting and opposing filings, and the record in this case; has had the benefit of oral argument by the parties; and is otherwise fully advised as to the premises. For the reasons set forth below, the Court in part grants and in part denies the Motions.

I. BACKGROUND

This case involves allegations that Defendants entered into an exclusive and collusive relationship to manipulate the force-placed insurance market and artificially inflate the amounts charged to mortgage borrowers for force-placed insurance premiums.

Plaintiff Dwight Wilson took a mortgage loan from Coral Gables Federal Savings and Loan Association in September, 1994 secured by a mortgage on real property in North Palm Beach, Florida. Compl. ¶ 47. In 2001, Wilson's mortgage was refinanced with Community Savings, F.A. Id. Wilson's mortgage was subsequently acquired by EverBank. Id. EverBank was thereafter responsible for the servicing of Wilson's mortgage. Id. Wilson had voluntary insurance coverage, which lapsed on April 25, 2013. Id. ¶ 49. Wilson subsequently obtained voluntary coverage with an effective date of May 15, 2013. Id. ¶ 50. Due to the lapse in coverage, EverBank purchased an annual force-placed hazard insurance policy from ASIC and placed it on Wilson's home. Id. ¶ 51. The annual cost of the force-placed policy was approximately $13,000 and provided less coverage than Wilson's prior policy. Id. ¶ 52. EverBank created an escrow account for Wilson with a debit for the approximately $13,000 in force-placed insurance charges.

Id. ¶ 53. Wilson's voluntary insurance coverage again lapsed in December 2013; Wilson again secured coverage in January 2014. Id. ¶¶ 54–55. EverBank refunded portions of the approximately $13,000 first charged to Wilson, but charged Wilson over $700 for a less than two-month period. Id. ¶ 56.

Plaintiff Jesus A. Avelar–Lemus took a mortgage loan from Opteum Financial Services, LLC, on June 24, 2005, secured by a mortgage on real property in Westbury, New York. Id. ¶ 60. Subsequently and at all times relevant to the Complaint, Avelar–Lemus' mortgage loan was owned and/or serviced by EverBank. Id. Until sometime in 2010, Avelar–Lemus had paid an annual premium of between approximately $1,845 and $2,345.08 for homeowner's insurance coverage obtained in the open market. Id. ¶ 62. By letter dated July 16, 2010, the Everhome Defendants notified Avelar–Lemus of a lapse in his homeowner's coverage and that it already had acquired an insurance policy from ASIC for retroactive coverage on Avelar–Lemu's property which had commenced on June 24, 2010. Id. ¶ 63. This premium for this policy was $5,248.00, which EverBank charged to Avelar–Lemus's escrow account. Id. EverBank informed Avelar–Lemus that “[t]he premium has been charged to your escrow account and your payment will be adjusted appropriately.” Id. The letter dated July 16, 2010, also disclosed that “an affiliate of [EverBank] may receive a commission on the premium charged.” Id. By letter dated June 17, 2011, EverBank notified Avelar–Lemus that it was renewing the force placed policy with ASIC for another year, effective June 24, 2011, and that the annual premium was $5,248.00. Id. ¶ 64. This letter also indicated EverBank may receive “commission” on the premium charged. Id. By letter dated July 3, 2013, EverBank notified Avelar–Lemus that they had renewed the lender-placed hazard insurance policy with ASIC on his property for another year, and that the policy effective date was retroactive to June 24, 2013. Id. ¶ 66. The annual premium on this policy renewal was $4,563.00. Id.

Plaintiffs Jessie and Mattie Cross obtained a mortgage loan from CMSC Mortgage Company secured by a mortgage on real property in East St. Louis, Illinois. Id. ¶ 68. Subsequently and at all times relevant to the Complaint, the Crosses' mortgage loan was owned and/or serviced by EverBank.Id. The Crosses' voluntary insurance coverage lapsed in October 2012. Id. ¶ 68. EverBank subsequently force-placed an insurance policy from SGIC on the Crosses property. Id. ¶ 71. EverBank later renewed that policy. Id. ¶ 72. EverBank charged the premium amounts to the Crosses. Id. The annual amount charged to the Crosses for the force-placed policy was approximately $1,600. Id. ¶ 73.

Each Plaintiffs' mortgage agreement specifically requires the borrower to maintain hazard, wind and (for property located in a flood hazard area) flood insurance coverage on the mortgaged property, and explicitly permits the lender to obtain force-placed coverage and charge the premiums to the borrower rather than declare the borrow in default on its obligation to maintain insurance coverage. Id. ¶ 28. The lender is also authorized to force-place the coverage retroactively. Id. ¶ 32. Once a lapse in coverage was identified, ASIC or SGIC sent notice to the borrower, on letterhead identifying them with the lender or servicer, that insurance would be purchased and force-placed if the borrower did not continue his or her required voluntary coverage. Id. ¶ 31. If the lapse continued, the insurer then notified the borrower that insurance was being force-placed at his or her expense. Id. After coverage was forced-placed on the property, EverBank paid the insurer and charged the borrower for the payment, which was either deducted from the borrower's mortgage escrow account or added to the balance of the borrower's loan. Id. ¶ 33.

Plaintiffs readily admit that “[p]ermitting a lender to forcibly place insurance on a mortgaged property and charge the borrower the full cost of the premium is neither a new concept nor a term undisclosed to borrowers in mortgage agreements.” Id. ¶ 28. However, they allege that unknown to the borrowers and not disclosed in the mortgage agreements is that EverBank maintained an exclusive relationship with ASIC and SGIC to manipulate the force-placed insurance market and artificially inflate the amounts they charge to borrowers for force-placed insurance premiums. Id. ¶ 29. Part of the fees charged to Plaintiffs as force-placed insurance premiums, they allege, were kickbacks from ASIC and SGIC to EverBank disguised as “commissions” or “expense reimbursements,” or inflated costs which covered the cost of discounted services. Id.

Plaintiffs describe the “scheme” as follows: EverBank purchases master insurance policies that cover an entire portfolio of mortgage loans. Id. ¶ 31. The insurer—here, ASIC or SGIC—then monitors the portfolio of mortgages to identify a borrower's insurance lapse. Id. When the insurer or the lender determines that a borrower has failed to maintain the required coverage, it begins a notification process to urge the borrower to adhere to its obligation to maintain coverage. Id. If a lapse continues, the insurer notifies the borrower that insurance is being force-placed at his or her expense. Id. The insurer then places its own insurance on the property securing the mortgage loan. Id. No separate, individualized underwriting takes place for the force-placed coverage. Id. ¶ 32. Insurance is automatically placed on the property and the premium charged to the borrower. Id. That is, EverBank pays the insurer and then charges the borrower for the payment. Id. ¶ 33.

Then, the insurer “kicks-back” a set percentage of that payment to EverBank as a “commission.” Id. ¶ 34. No bona fide services are performed or actual costs incurred by EverBank for the return payment.Id. ¶ 35. That is, no work is ever done by EverBank to procure insurance for any particular borrower because the coverage comes through the master or umbrella policy already in place. Id. ¶ 36. As a result, no commission or compensation is “earned” and EverBank does not incur any costs in relation to the force-placement of insurance for any particular borrower. Id. The premiums paid by the borrowers are, therefore, inflated to account for the “kickbacks” or “unearned commissions” returned to...