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Francese v. AM. Modern INS. GRP., Inc.

United States District Court, D. New Jersey

April 16, 2019

LUIGI FRANCESE, on behalf of himself and all others similarly situated, Plaintiff,
AM. MODERN INS. GRP., INC., et al, Defendants.


          WILLIAM J. MARTINI, U.S.D.J.

         This matter comes before the Court upon Defendants American Modern Insurance Group, Inc.'s and American Modern Home Insurance Company's (collectively, "AMIG"), Residential Credit Solutions, Inc.'s ("RCS"), Specialized Loan Servicing, LLC's ("SLS"), Southwest Business Corporation's ("SWBC"), and American Security Insurance Company's ("ASIC") motions to dismiss. ECF Nos. 97, 99-102. The Court decides the matter on the papers without need for oral argument. L. Civ. R. 78.1(b). For the reasons set forth below, Defendants' motions to dismiss are GRANTED.

         I. BACKGROUND[1]

         The Court assumes familiarity with the facts and procedural history of this case, as set out in the Court's prior opinion. ECF No. 29 at 1-2. Plaintiff Luigi Francese ("Francese") alleges his mortgage loan servicers (RCS and SLS) and insurers (AMIG, SWBC, and ASIC) charged borrowers for "kickbacks" when buying force-placed or lender-placed hazard insurance policies ("LPIs"). See Second Am. Compl. ¶¶ 11-17, 22-44, ECF No. 63 ("SAC"). He also asserts RCS, SWBC, and AMIG together undervalued losses on LPI-covered properties and that, when his Property suffered damage, misappropriated the insurance proceeds. Id. ¶¶ 14, 91.

         A. Individual Allegations

         1. The Mortgage Loan

         Francese owns real property in New Jersey (the "Property"), for which he signed a mortgage loan (the "Mortgage"). Id. ¶¶ 45-46. RCS originally serviced the Mortgage, and then in 2016, SLS took over as the loan servicer. Id. ¶ 48. Francese's Mortgage required him to maintain insurance on the Property "in the amounts ... for the periods that Lender requires." Id. ¶ 47; AMIG Br., Ex. A, ECF No. 98-1. If he failed to maintain adequate, continuous insurance, then:

         Lender may obtain insurance coverage, at Lender's option and Borrower's expense. . . . [S]uch coverage shall cover Lender, but might or might not protect Borrower, Borrower's equity in the Property, or the contents of the Property, . . . and might provide greater or lesser coverage than was previously in effect. Borrower acknowledges that the cost of the [Lender] insurance coverage so obtained might significantly exceed the cost of the insurance that Borrower could have obtained.

         Ibid, (emphasis added). And if a loss occurred, then:

[A]ny insurance proceeds, whether or not the underlying insurance was required by Lender, shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender's security is not lessened. . . . If the restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security Instrument, . . . with the excess, if any, paid to Borrower.
Ibid, (emphasis added). The Mortgage further provided that, "[i]f (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument, . . . then Lender may do and pay for whatever is reasonable or appropriate to protect Lender's interest in the Property and rights under this Security Instrument[.]" AMIG Br., Ex. A.

         2. The Lender-Placed Insurance Policies and Insurance Proceeds

         In New Jersey, the Commissioner of the Department of Banking and Insurance ("Commissioner" or "DOBI") approves and regulates insurance rates. N.J. Stat. Ann. § 17:29AA-5. Once an insurer submits its rate, the Commissioner must review and either approve or disapprove the rates. Id. § 17:29A-7. Also, the Commissioner can only approve "rates that are not unreasonably high . . . and are not unfairly discriminatory." Id; see Id. § 17:16V-3g ("[LPI] costs charged to the debtor shall not be excessive or discriminatory. Any cost or element of cost which is approved by the [DOBI] or filed with the department and not disapproved . . . shall not be deemed to be excessive or discriminatory."); In re N.J. Title Ins. Litig, 683 F.3d 451, 453 (3d Cir. 2012) (noting same as to title insurance rates).

         In 2014 and 2015, when Francese failed to provide evidence of his own insurance, RCS sent "several" letters informing him that it had obtained AMIG LPI certificates that covered the Property. SAC ¶ 49; AMIG Br., Ex. C. The letters warned Francese that LPI premiums may be "much higher" than if he obtained his own insurance, the LPI "coverage provided may be less" than securing insurance himself, and that "[p]art of the policy premium may be used by [AMIG] to reimburse" RCS for expenses incurred in placing the LPI policies. AMIG Br., Ex. C at 1-11. The letters also informed Francese that if he provided proof of coverage, RCS would cancel the policy. Id.

         SWBC "administer[ed] the lender-placed insurance program for RCS," SAC ¶ 5, and issued RCS the AMIG LPI certificates, AMIG Br., Ex. C at 3, 7, 11 ("Evidence of Insurance" documents). When RCS obtained the LPI policies, the listed annual premiums were within the Residential Hazard-Lender Placed insurance rates AMIG filed with, and approved by, DOBI: $1.00 for each $100 of coverage. See AMIG Br., Ex. D (Decl. of Steve ...

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