United States District Court, D. New Jersey
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.
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
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.
The Mortgage Loan
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:
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.
(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.
The Lender-Placed Insurance Policies and Insurance
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).
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.
"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 ...