Randy Cohen v. American Security Insurance, C
2013 U.S. App. LEXIS 22394
| 7th Cir. | 2013Background
- Schilke borrowed from World Savings Bank, FSB (later Wachovia) and agreed to maintain hazard insurance on her home.
- Lender could obtain insurance if borrower failed to insure, with costs charged to borrower and potential commissions to lender’s affiliate.
- Schilke’s policy lapse led Wachovia to place lender-placed insurance from ASI, backdated to the lapse, at a higher premium.
- Wachovia notified Schilke of options: prove insurance to cancel lender-placed coverage or pay the higher premium; warned premiums could be 2–5x greater and include affiliate commissions.
- Schilke filed a class action alleging Illinois Consumer Fraud Act violations, fraud, conversion, and unjust enrichment; district court dismissed, citing preemption and filed-rate doctrine.
- On appeal, court affirms dismissal, holding no viable claims state; disclosures and contract terms negated deception or unfair practices; backdating within contract rights; kickback label insufficient.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| ICFA claim viability | Schilke contends deception via undisclosed kickbacks. | Disclosures fully informed; no deception or unfair practice. | No plausible ICFA claim. |
| Breach of contract viability | Kickbacks breach implied good-faith duties. | No prohibition on fees/commissions; backdating allowed to protect lender's rights. | No viable breach-of-contract claim. |
| Fraud claim viability | Omission of material fact about kickbacks. | No duty to disclose; no fiduciary relationship; disclosures adequate. | No plausible fraud claim. |
| Conversion viability | Premiums constituted misappropriated funds. | Claims seek money under contract, not identifiable chattel; no wrongful possession. | Conversion claim fails. |
| Unjust enrichment viability | Wachovia unjustly enriched via kickback | Express contract governs conduct; unjust enrichment unavailable where contract exists. | Unjust enrichment claim fails; derivative claims fail as well. |
Key Cases Cited
- Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951 (Ill. 2002) (elements of Illinois Consumer Fraud Act claim)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (omissions and duty to disclose in fraud claims)
- In re Ocwen Loan Servicing, LLC Mortg. Servicing, 491 F.3d 638 (7th Cir. 2007) (OTS preemption and savings clause considerations)
- Johnson v. Matrix Fin. Servs. Corp., 820 N.E.2d 1094 (Ill. App. Ct. 2004) (kickbacks doctrine in Illinois public policy context)
- Burns v. Orthotek, Inc. Emp’rs Pension Plan & Trust, 657 F.3d 571 (7th Cir. 2011) (futility standard for Rule 12(b)(6) amendments)