Hong v. Bank of America

SUE HONG, on behalf of herself and all others similarly situated, Plaintiff, v. BANK OF AMERICA, N.A, individually and as successor-in-interest, QBE INSURANCE CORP., NATIONAL GENERAL HOLDINGS CORP., and DOES 1-10, Defendants.

No. C20-1667RSM

United States District Court, W.D. Washington, Seattle

July 29, 2021

ORDER GRANTING MOTIONS TO DISMISS

RICARDO S. MARTINEZ, CHIEF UNITED STATES DISTRICT JUDGE.

I. INTRODUCTION

This matter comes before the Court on Defendant QBE Insurance Corporation (“QBE”)'s Motion to Dismiss, Dkt #30, and Defendant Bank of America, N.A.'s Motion to Dismiss, Dkt. #32, both brought under Rules 12(b)(1) and 12(b)(6). Plaintiff Sue Hong has filed a single brief responding to both Motions. Dkt. #40. The Court has reviewed the above briefing, as well as reply briefs from Defendants, and finds that oral argument is not necessary. For the reasons stated below, the Court GRANTS Defendants' Motions and dismisses this case.

II. BACKGROUND^[1]

Plaintiff Sue Hong owns a house in King County, Washington, with a mortgage serviced by Defendant Bank of America (“BOA” or “BANA”)). Ms. Hong allowed her home insurance to lapse. Defendants stepped in to insure her property through a process called lender placed insurance (“LPI”). QBE filed its proposed LPI program and rates with the Washington State office of Insurance Commissioner in January of 2009. See Dkt. #33-2.^[2] QBE's filing was approved by the OIC effective April 2009. Id. The application included the underlying rate used for LPI and the coverage methodologies for determining insurance premiums. Id. at 13-16.

Plaintiff's LPI coverage started on October 21, 2014, and was renewed annually. Defendants set coverage at $519, 700, the same amount previously set by Ms. Hong when she obtained insurance on her own. See Dkt. #27 at 34. The cost of this coverage was $4, 677.30 each year. Ms. Hong states in pleading that “[t]his practice apparently stopped with respect to Ms. Hong's LPI when the value of the FPI^[3] was reduced beginning with the policy issued in October of 2016.” Id.

Attached to the Complaint is Ms. Hong's Deed of Trust, which states, in part:

5. Property Insurance. Borrower shall keep the improvements now existing or hereafter erected on the Property insured against loss by fire, hazards included within the term “extended coverage, ” and any other hazards including, but not limited to, earthquakes and floods, for which Lender requires insurance. The insurance shall be maintained in the amounts ... and for the periods that Lender requires....

If Borrower fails to maintain any of the coverages described above, Lender may obtain insurance coverage, at Lender's option and Borrower's expense. Lender is under no obligation to purchase any particular type or amount of coverage. Therefore, such coverage shall cover Lender, but might not protect Borrower, Borrower's equity in the Property, or the contents of the Property, against any risk, hazard or liability, and might provide greater or lesser coverage than was previously in effect. Borrower acknowledges that the cost of insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained. Any amounts disbursed by Lender under this Section 5 shall become additional debt of the Borrower secured by this Security Instrument

9. Protection of Lender's Interest in the Property and Rights Under this Security Agreement. If (a) Borrower fails to perform the covenants and agreements contained in this Security instruments then Lender may do and pay for whatever is reasonable or appropriate to protect the Lender's interest in the Property.

Id. at 32 (portions quoted in pleading); id. at 102 and 104 (attached Deed of Trust).

Plaintiff and her husband filed their first complaint in King County Superior Court on October 15, 2019. See Dkt. #33-1. After Bank of America removed the case and filed a motion to dismiss, Plaintiff voluntarily dismissed that case. See Case No. C19-1907-RSM, Dkt. #29.

The instant case was filed a year later in state court with similar claims. See Dkt. #1. Plaintiff filed an amended complaint on October 5, 2020. Dkt. #1-1. After removal, Plaintiff filed her Second Amended Complaint on December 16, 2020. Dkt. #27.

Plaintiff brings this case on her own and on behalf of a class of similarly situated customers. She alleges “BOA has an exclusive arrangement with QBE, National General, and other DOES 1-10, and their affiliates to manipulate the force-placed insurance market and charge borrowers more for LPI than permitted by the mortgage contract.” Dkt. #27 at 25. BOA allegedly “pays QBE, National General, and other Does 1-10, premiums for master group policies which cover BOA's entire portfolio of mortgage loans, and QBE, National General, and other DOES 110 then kicks back a portion of these premium payments through reimbursement of expenses and free or below-cost services unrelated to the provision of LPI.” Id.

The Second Amended Complaint brings claims for breach of the Washington Consumer Protection Act (“CPA”) and common law claims for breach of contract, violations of the duty of good faith and fair dealing, negligent supervision, breach of fiduciary duty, and civil conspiracy.^[4]Plaintiff claims there is “a monopolistic arrangement between BOA, its mortgage servicing entities and its mortgage servicing vendors, QBE, and National General and other DOES 1-10, ” related to “lender placed insurance (LPI) on Sue Hong's property, and others similarly situated” to “charge her, and others similarly situated, amounts styled as insurance charges but which were, in fact, far greater than the actual costs of protecting the properties serving as collateral for the mortgage loans.” Dkt. #27 at 2. Plaintiff states that she “does not challenge the practice of forceplacing insurance” nor “the insurance rates charged by the FPI insurers nor the premium amounts paid by BOA to the FPI insurers.” Id. Rather, she is only challenging “the amounts styled as FPI insurance charged to borrowers by BOA” because “[t]he amounts charged borrowers by BOA are not insurance premiums nor a pass-through of insurance premiums.” Id.

III. DISCUSSION

A. Legal Standard

Under Rule 12(b)(1), a defendant may challenge the plaintiff's jurisdictional allegations in one of two ways: (1) a “facial” attack that accepts the truth of the plaintiff's allegations but asserts that they are insufficient on their face to invoke federal jurisdiction, or (2) a “factual” attack that contests the truth of the plaintiff's factual allegations, usually by introducing evidence outside the pleadings. Leite v. Crane Co., 749 F.3d 1117, 1121-22 (9th Cir. 2014). When a party raises a facial attack, the court resolves the motion as it would under Rule 12(b)(6), accepting all reasonable inferences in the plaintiff's favor and determining whether the allegations are sufficient as a legal matter to invoke the court's jurisdiction. Id. at 1122.

In making a 12(b)(6) assessment, the court accepts all facts alleged in the complaint as true, and makes all inferences in the light most favorable to the non-moving party. Baker v. Riverside County Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009) (internal citations omitted). However, the court is not required to accept as true a “legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Id. at 678. This requirement is met when the plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The complaint need not include detailed allegations, but it must have “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Absent facial plausibility, a plaintiff's claims must be dismissed. Id. at 570.

B. The Filed-Rate Doctrine

In Washington State, the filed rate doctrine bars lawsuits that challenge the reasonableness of insurance rates filed and approved by a regulating agency. Tenore v. AT&T Wireless, 136 Wn.2d 322, 332, 962 P.2d 104, 108 (1998). This doctrine “provides, in essence, that any ‘filed rate'-a rate filed with and approved by the governing regulatory agency-is per se reasonable and cannot be the subject of legal action against the private entity that filed it.” McCarthy Fin., Inc. v. Premera, 182 Wn.2d 936, 347 P.3d 872, 875 (2015). Underlying the doctrine are two key principles: “(1) to preserve the agency's primary jurisdiction to determine the reasonableness of rates, and (2) to insure that regulated entities charge only those rates approved by the agency.” Id. (quoting Tenore, 136 Wn.2d at 331-32). Keeping the Court out of the role of determining the reasonableness of rates is often referred to as the principle of “nonjusticiability.” Federal courts recognize a further principle underlying the doctrine: “that litigation should not become a means for certain ratepayers to obtain preferential rates (the principle of ‘nondiscrimination').” Rothstein v. Balboa Ins. Co., 794 F.3d 256, 261 (2d Cir. 2015). The doctrine “has often been invoked rigidly, even to bar claims arising from fraud or misrepresentation.” Tenore, 962 P.2d at 108.

Alpert v. Nationstar Mortg. LLC, 243 F.Supp.3d 1176, (W.D Wash. 2017), cited heavily by Defendants, is a recent instructive case involving force-placed insurance obtained by a bank who issued a home mortgage loan to the plaintiff. The Court examined claims similar to those brought here and ruled that “the filed rate doctrine precludes ...