9 F. Supp. 3d 223
N.D.N.Y.2014Background
- Plaintiffs James A. Hoover, Kimberly Hoover, and David Mincel sue HSBC Bank USA, HSBC Mortgage, and Assurant entities over force-placed flood insurance practices and related kickbacks.
- Plaintiffs allege excessive coverage, kickbacks/commissions, and backdating of force-placed policies, harming plaintiffs and others similarly situated.
- Plaintiffs seek injunctive relief, declaratory judgments, damages, and attorneys’ fees in a putative class action.
- Mortgage contracts grant lenders discretion to require hazard insurance; HUD/NFIA impose minimums, creating a potential ambiguity about allowed flood-coverage levels.
- Hoovers’ FHA loan with an $85,000 flood policy during the force-placing years allegedly exceeded their loan balance; Mincel faced force-placed policy amounts of $184,437.
- Plaintiffs’ theories include breach of contract/implied covenant, unjust enrichment, fiduciary duty (and aiding), conversion, and NYDPA violations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Filed Rate Doctrine applicability | Plaintiffs challenge conduct, not rates, so FRD should not bar claims. | Rates were filed/approved; claims barred as to rate reasonableness and standing. | Filed rate doctrine denied as defense; claims survive motion to dismiss. |
| Standing to sue Assurant | Assurant causally connected; injury traceable to Assurant’s conduct. | Assurant lacks contract with plaintiffs; no causal link. | Assurant's standing challenge denied without prejudice to renewal after discovery. |
| Breach of contract and implied covenant | Contract language is ambiguous; defendant exceeded authority and harmed plaintiffs; kickbacks/backdating alleged. | Contract unambiguously authorizes lender discretion; no breach. | Claims survive; contract terms deemed ambiguous; dismissal denied with leave to amend on certain theories. |
| Kickback allegations | Kickbacks/indirect benefits violated contract and law; pled with detail. | Kickbacks not adequately pled or authorized. | Kickback-based breach claims denied dismissal; otherwise viable. |
| New York Deceptive Practices Act (NYDPA) | Deceptive practices likely; disclosures insufficient and kickbacks undisclosed. | Practices authorized by mortgage terms and disclosed. | NYDPA claims not precluded; likely misleadings exist; denied dismissal. |
Key Cases Cited
- Kolbe v. BAC Home Loans Servicing, L.P., 738 F.3d 432 (1st Cir. 2013) (contract interpretation of uniform flood-insurance clause; ambiguity and context)
- Casey v. Citibank, 915 F. Supp. 2d 255 (N.D.N.Y. 2013) (two-sentence interpretation of HUD-mandated insurance language)
- Ellsworth v. U.S. Bank, 908 F. Supp. 2d 1063 (N.D. Cal. 2012) (kickbacks/force-placed insurance analysis supporting non-dismissal)
- Abels v. JPMorgan Chase Bank, 678 F. Supp. 2d 1277 (S.D. Fla. 2009) (filed-rate doctrine limitations and insurer rates context)
- Gallo v. PHH Mortgage Corp., 916 F. Supp. 2d 537 (D.N.J. 2012) (non-challenge to rates where conduct underlying rate is challenged)