On September 24, the Court of Appeals for the Eleventh Circuit in Patel v. Specialized Loan Servicing, LLC ruled that a group of plaintiffs from Florida and Pennsylvania could not challenge the forced-placed insurance (“FPI”) rate their mortgage servicers charged. Because the plaintiffs did not purchase homeowner’s insurance, the mortgage servicers purchased FPI for the properties through American Security Insurance Company (“ASIC”). The plaintiffs alleged that the mortgage lenders received “rebates” or “kickbacks” from ASIC and brought claims for breach of contract and unjust enrichment, as well as for alleged violations of the Truth in Lending Act, the Racketeer Influenced and Corrupt Organizations Act, and the Florida Deceptive and Unfair Trade Practices Act.
The Eleventh Circuit held that the plaintiffs could not challenge the insurance rate charged by ASIC under the filed-rate doctrine, which prevents any judicial action that undermines agency rate-making authority. The legislatures of Florida and Pennsylvania require insurers to get approval from state administrative agencies as to the reasonableness of insurance rates. Thus, the plaintiffs could not bring suit challenging the insurance rates without first following the statutory mechanisms provided by the Florida and Pennsylvania statutes.
The case is notable because the Eleventh Circuit held that the filed-rate doctrine also barred the plaintiffs from suing their mortgage servicers for the alleged insurance-kickback scheme, even for alleged breaches of their mortgage contracts. While the mortgage servicers were not directly regulated, they simply charged the rate ASIC—the regulated entity—filed and had approved by the state agencies. To allow the plaintiffs to sue their mortgage servicers would have allowed them to do indirectly what they could not do directly: challenge the insurance rates the regulators approved.