Source: https://insuranceclaimsbadfaith.typepad.com/insurance_claims_badfaith/filed-rate-doctrine/
Timestamp: 2019-04-25 11:42:12+00:00

Document:
FILED RATE BARS CLAIMS, UNTIL IT DOESN'T.
A purchaser of electricity foolishly entered into a contract whereby the supplier of electricity could charge an initial rate lower than its filed rates, i.e., lower than the rates filed with the relevant regulatory authority that approved a filed rate.
After the initial rate period expired, the contract provided that the supplier could charge higher rates. After the initial rate period expired, the supplier in fact charged higher rates.
The purchaser sued. It asserted several grounds. On one of them, that the supplier allegedly breached its implied duty of good faith and fair dealing, a panel of the Second Circuit held that there was no bad faith as a matter of law. The parties contracted for an initial rate that was lower than the filed rate that the supplier was allowed to charge. That meant there was no breach of the implied covenant of good faith and fair dealing, according to the panel deciding Connecticut law. Richards v. Direct Energy Serv's, LLC, 915 F.3d 88, 98-100 (2d Cir. 2019).
Their reasoning as to the supplier's higher rates after the initial rate period expired is, with all due respect, circular at best. The panel ruled that in its view the supplier obviously exercised its discretion in good faith to charge higher rates. They pointed to evidence that other suppliers charged those high rates, and rejected the evidence that the higher rates were higher than the approved rates that the supplier could charge if it had followed the regulator's rulings.
Seriously. That's what they said.
On remaining counts, the same panel unhesitatingly applied the filed rate as a defense to the supplier's liability for its charges.
So, in this Second Circuit panel's view, there was no filed rate, until there was. Regardless of the filed rate, there was no bad faith here, they said.
BAD FAITH TO ADJUDICATE FILED insurance RATE WITH FEDERAL CASES?
The filed rate doctrine is an affirmative defense raised by defendants who charge rates, in essence. The defense requires a rate filing with an administrative agency that is authorized by law to review the rate, and approve it or reject it.
In insurance cases, it seems that it should be State law that decides whether a filed rate doctrine exists or, if it is determined to exist, whether it applies in the given case.
Federal Judges decide that there is an insurance Rate Doctrine with federal cases. The latest example is a 2-to-1 panel decision written by a judge visiting from the Sixth Circuit. Patel v. Specialized Loan Servicing LLC / Fowler v. Caliber Home Loans, Inc., 2018 U.S. App. LEXIS 27221, 2018 WL 4559091 (11th Cir. September 24, 2018). The defendants and their supporting amicus did not cite any Florida filed rate doctrine cases in their briefs. (I have their briefs.) There aren't any Florida filed rate doctrine cases anyway.
They did not even try to argue that Florida would invent a Filed insurance Rate Doctrine, or that Florida law would apply it in their case.
The Florida cases cited by the Sixth Circuit judge in Patel/Fowler do not address any Filed Rate Doctrine let alone in insurance.
To say again, there are none. No Florida cases have addressed whether there is a Filed insurance Rate Doctrine in Florida.
For that matter, no Florida cases have addressed whether there is any Filed Rate Doctrine of any kind in Florida.
So, is it "bad faith" in the broadest sense for Federal judges to adjudicate a Filed insurance Rate Doctrine with Federal cases? Or to fail to require counsel to support a Filed insurance Rate defense in a given jurisdiction with case law decided by that jurisdiction on that issue and, if none is available, to explain why that support is not available?
Please Read The Disclaimer. ©2018 Dennis J. Wall. All Rights Reserved. And see the PowerPoint presentation posted by the Florida Bar to their website as a pdf, here, as well as watch and listen to the soundtrack of a YouTube video on this subject, here.
FLORIDA REJECTS KICKBACKS IN INSURANCE RATES.
This article continues an article begun on Insurance Claims and Issues Blog on Monday, December 5, 2016, accessible here and at http://insuranceclaimsissues.typepad.com/insurance_claims_and_issu/2016/12/kickbacks-allowed-in-insurance-rates.html.
In lender force-placed insurance cases, force-placed insurance premiums are paid by lenders, but the lenders do not complain that the premiums are too high in contrast to the situation of consumers who claim in utilities rates lawsuits that a utility's rates are too high. Lenders hide the added expense of LFPI premiums in the borrower's monthly loan payment, but the borrower does not pay the force-placed insurance premiums as such. When these issues are presented by defendants' motions to dismiss, such issues are usually resolved in federal district courts where most of these cases and the vast majority of these motions to dismiss are filed.
Further, insurance companies which provide lenders with force-placed insurance policies regularly "redact" or "seal" whole swaths of their rate filings. See, e.g., the Florida Office of Insurance Regulation administrative docket for the rate filing titled, In the Matter of: American Security Insurance Company, Case No. 141841-13, Rate File Log #13-04125. As if to drive this point home, the carrier in that case successfully contended in a different context, without opposition, that the terms of its contracts including with mortgage lenders are trade secrets and should not be revealed. See ASIC v. State, Office of Ins. Reg., No. 2013-CA-001701, 2015 WL 10384359, at *4 (Fla. Cir. Ct., 2d Cir., Leon County, Aug. 13, 2015).
Another significant problem with transferring the filed rate doctrine from utilities regulation to use in defense of insurance cases generally, applies also to LFPI cases in particular. There is no known reporting system of administrative agency decisions concerning filed insurance rates.
In Florida, however, the Insurance Commissioner has consistently rejected kickbacks in filed insurance rates -- and just as consistently has required force-placed insurance carriers to agree not to include kickbacks if they want approval of their insurance rates in Florida. E.g., In re: American Modern Insurance Group, Inc., No. 174210-15-CO, Consent Order (Fla. O.I.R. Sept. 16, 2015), accessible online with its Exhibit "A," July 6, 2015 Florida Office of Insurance Regulation "Target Conduct Final Examination Rep't of American Modern Home Ins. Co.," et al., at http://www.floir.com/siteDocuments/American_Modern_Insurance_Group_Inc%20_Consent_Order_174210-15-CO.pdf (last accessed on Monday, December 5, 2016); In re: American Security Insurance Company, No. 14-141841-13, Consent Order (Florida O.I.R. October 7, 2013), accessible online at http://www.floir.com/siteDocuments/AmericanSecurity141841-13-CO.pdf (last accessed on Monday, December 5, 2016); In re: Praetorian Insurance Company, No. 141851-13-CO, Consent Order (Fla. OIR April 12, 2014), at http://www.floir.com/siteDocuments/Praetorian141851-13-CO.pdf (last accessed on Monday, December 5, 2016).
To be continued on Insurance Claims and Issues Blog. NEXT: FLORIDA REJECTS THE FILED RATE DOCTRINE IN INSURANCE.
AARP AND UNITED HEALTH CARE, and "THE FILED RATE DOCTRINE."
FEDERAL JUDGE IN TEXAS DISMISSES TEXAS DECEPTIVE PRACTICES AND UNFAIR INSURANCE CLAIMS BECAUSE OF "THE FILED RATE DOCTRINE."
In Peacock v. AARP, Inc., No. 3:13-cv-00459, 2016 WL 3792711, at *1 (S.D. Tex. Feb. 12, 2016), the plaintiffs sued AARP and United Health Care in a putative class action of AARP members. The Federal Court never got to the merits.
After their original complaint was dismissed under Federal Rule 12(b)(6), the plaintiffs filed an amended complaint that was 58 pages long with 370 exhibits. The Federal District Judge was still not convinced. In the decision discussed here, the Federal Judge granted a motion to dismiss the first amended complaint, too.
(1) illegally charges an improper monthly fee to its group plan members [i.e., the plaintiffs and others similarly situated], and (2) fails to truthfully disclose this fee to governmental authorities and members of the insurance plan. Accordingly, Plaintiffs allege that Defendants have violated several provisions of the Texas Insurance Code [for a shorthand reference, the Court often called these 'the Chapter 541 claims'] as well as the Texas Deceptive Trade Practices Consumer Protection Act ('DTPA').
Peacock v. AARP, Inc., No. 3:13-cv-00459, 2016 WL 3792711, at *1 (S.D. Tex. Feb. 12, 2016).
Accordingly, the Court finds that the filed rate doctrine bars Plaintiffs' claims under Chapter 541 and the DTPA because these claims are pled to attack the legality vel non of the rates charged by Defendants for group insurance, and the Court therefore GRANTS the Defendants' motion to dismiss on these grounds.
The dismissal was with prejudice. Peacock v. AARP, Inc., No. 3:13-cv-00459, 2016 WL 3792711, at *8 (S.D. Tex. Feb. 12, 2016) (emphasis by the Court).
However, objectively speaking the plaintiffs in this Texas case did not appear to challenge the legality of the rates charged by AARP or by United Health Care for group insurance. They instead challenged the monthly improper fee. They did not allege, apparently, that the entire monthly health insurance premium was illegal, only that a portion collected by AARP if you will, was "illegal" under the cited Texas statutes.
Further, neither the defendants nor the District Court in this case examined any of the defendants' premium rate filings (which would presumably have been rate requests filed by the regulated health insurance company, United Health Care). This is not how the filed rate doctrine works. Application of the doctrine on a Rule 12(b)(6) motion to dismiss which is what was before the Court in this Texas case -- if it applies to such a motion to dismiss at all-- requires at least a declaration of testimony and evidence that the allegedly illegal charge was included in a rate filing that was approved by an appropriate administrative agency. See generally "Force-Placed Insurance / Filed Rate Doctrine Imported From Utilities Regulation to Insurance Law," 37 Insurance Litigation Reporter 435 (October 6, 2015 issue), available at www.lenderforceplacedinsurance.com on the author's "Works" page.
Finally, it does not appear that either the defendants or the District Judge identified which administrative agency they viewed as the agency with authority to approve United Health Care's group insurance rates. A small oversight, perhaps, but in this case a revealing one.
In short, the defendants said that the filed rate doctrine applied to bar the plaintiffs' claims in this case. That is all. The defendants said that. And that was enough for the District Court to dismiss the claims in this case.
SOUTHERN DISTRICT OF FLORIDA CASE PRECEDENT: A LOOK AT THE facts.
On the facts in the pending case, Lowe v. Loancare, LLC (S.D. Fla. No. 1:15-cv-23700-KMM), declarations filed by the defendants do not appear to attach any documents with an Insurance Commissioner's "APPROVED" stamp on the insurer's rate filing. The same lawyers representing defendants in the Lyons case in New York filed that kind of proof there. For that reason alone, Lyons of New York is not precedent for applying the filed rate doctrine in the Lowe case in Florida.
The declarations filed in the Lowe case do not present documents that tend to prove that the Florida Office of Insurance Regulation approved an insurance carrier's filing for an insurance premium rate. Instead, the declarations filed by the defendants in Lowe present testimony that the Florida Office of Insurance Regulation approved insurance rate requests filed by the insurance carrier involved, American Security Insurance Company or "ASIC," including in 2013.
The Florida Office of Insurance Regulation disapproved and rejected a rate request filed by the insurance carrier involved, ASIC, including in 2013.
The evidence of ASIC's filed rate requests for approval of its insurance premiums in Florida -- including ASIC's filed rate request that was denied and rejected by the Florida Office of Insurance Regulation -- is easy to find, including rate requests filed by ASIC seeking approval of its insurance premium rates for 2013.
The evidence is in the public record. It is included in four pages in Chapter 6, n. 35, of my book on Lender Force-Placed Insurance Practices published by the American Bar Association in 2015.
In conclusion, based on the law that applies to the claims and defenses in Lowe, and on the facts in the record in Lowe, there is much for the Chief Judge of the Southern District, the Honorable K. Michael Moore, and the U.S. Magistrate Judge on the case as well, the Honorable Chris M. McAliley, to consider before issuing what will probably be a short order refusing to grant a motion to dismiss based on the filed rate doctrine in another insurance case pending in the Southern District of Florida, Lowe v. Loancare, LLC (S.D. Fla. No. 1:15-cv-23700-KMM).
Please Read The Disclaimer. ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with Supplements). The recent defense of the Filed Rate Doctrine in insurance cases is addressed by itself in a new Section § 11:26 in 2016. All rights reserved.
SOUTHERN DISTRICT OF NEW YORK PRECEDENT IN SOUTHERN DISTRICT OF FLORIDA?
Image copyright 2016 by Dennis J. Wall. All rights reserved.
We start today with a question: Why is the Lyons case decided in the Southern District of New York important to a case pending in the Southern District of Florida?
The answer is: Because Lyons relies on a panel decision of the Second Circuit Court of Appeals. The judge in Lyons had to rely on the Second Circuit because that judge's District Court is in the Second Circuit. District Judges in the Second Circuit have to obey the Second Circuit. So the Lyons judge relied on the discredited Rothstein decision of a Second Circuit panel in July, 2015. See Dennis J. Wall, "Force-Placed Insurance / Filed Rate Doctrine Imported From Utilities Regulation to Insurance Law / Second Circuit Court of Appeals Panel Applies Doctrine to Texas, New Hampshire, and New York Lender Force-Placed Insurance Practices / Rothstein v. Balboa Insurance Co., 794 F.3d 256 (2d Cir. 2015), 37 Insurance Litigation Reporter 435 (October 6, 2015). A reprint of this publication © Thomson Reuters, reprinted with permission, is available at www.lenderforceplacedinsurance.com.
A District Judge in a previous Southern District of Florida case also relied on the Second Circuit panel decision in Rothstein. The Florida judge's court is not in the Second Circuit and the Florida judge did not have to obey the Second Circuit panel; he chose to. The previous case is Trevethan v. Select Portfolio Servicing, Inc.
The defendants have accordingly cited Trevethan and filed copies of Rothstein and Lyons to persuade yet another District Judge, the Chief Judge of the Southern District, the Honorable K. Michael Moore, and the U.S. Magistrate Judge on the case as well, the Honorable Chris M. McAliley, to apply the filed rate doctrine in another insurance case pending in the Southern District of Florida, Lowe v. Loancare, LLC (S.D. Fla. No. 1:15-cv-23700-KMM).
Next we take a look at the dispute on the law in the context of the pending Southern District of Florida case, followed by a look at the facts in the same context.
THE LESSONS OF Lyons, FROM SOUTHERN DISTRICT TO SOUTHERN DISTRICT.
IS NEW YORK'S SOUTHERN DISTRICT FLORIDA'S SOUTHERN DISTRICT, TOO?
Florida field. Image copyright by Dennis J. Wall. All rights reserved.
We left off our discussion of Plausible Complaints and imPlausible Judgments noting that the judge who wrote the opinion in the Clarizia case in the Southern District of New York attached a copy of his slipsheet opinion in the earlier case of Lyons v. Litton Loan Servicing LP, No. 1:13-cv-513 (ALC)(GWG), ___ F. Supp. 3d ___, 2016 WL 415165 (S.D.N.Y. February 2, 2016). Lyons is a useful example of everything Clarizia and Rothstein are not.
The defendants filed declarations with attached documentation that they said reflected "APPROVED" file-stamps of the Florida Office of Insurance Regulation of their relevant premium rate filings. The defendants argued that this "evidence" was "undisputed." Without arguing here whether the evidence was admissible and so whether it was legally sufficient to support an ultimate judgment of dismissal with prejudice, the procedures on display in Lyons show how the filed rate doctrine should be argued and applied in an insurance case, if at all.
The defendants in Lyons came forward with both testimonial and documentary evidence to support their filed rate doctrine affirmative defenses. The plaintiffs for whatever reason did not appear to rebut any of this evidence. I could not find any rebuttal evidence in the record from my review of the Lyons Electronic Court File on PACER. I do not mean that the plaintiffs filed materials in rebuttal and that in my humble opinion those materials were legally insufficient; I mean that I could not find any materials filed in rebuttal.
This seems to be the reason that the Court did not mention any materials filed to rebut the defendants' filed rate showing when the Court entered its Order granting the defendants' motion to dismiss plaintiffs' claims because of the filed rate doctrine. There weren't any.
Next: The lessons Lyons teaches.
IN NEW YORK'S SOUTHERN DISTRICT, NOBODY DARES ASK QUESTIONS.
IN NEW YORK'S SOUTHERN DISTRICT, NOBODY DARES ASK QUESTIONS Clarizia III.
Courthouse, Newburgh, New York. Image courtesy of New York Public Library.
This article continues the last previous series installments published on Insurance Claims and Issues Blog on Wednesday, March 9, 2016. Here they are, in order: one, two, and three.
Just as the Clarizia defendants relied only on Rothstein and not on the record, so the District Judge relied on Rothstein and not the record. The Court in Clarizia dismissed the lender force-placed insurance claims at issue and directed the Clerk "to terminate this case."
As the defendants attached a copy of the Rothstein case to their letter in Clarizia, so again the judge in Clarizia attached to his opinion a copy of his own opinion in a previous case, Lyons v. Litton Loan Servicing LP.
The next article in this series will explain why Lyons v. Litton Loan Servicing LP was recently raised in a case in South Florida by the same lawyers who successfully wrote a letter to a judge asking the judge to dismiss Clarizia in Southern New York.
Bank's Alleged Bad Faith Withholding New Jersey Fire Insurance Proceeds.
Appellate Courthouse in New York City (Second Circuit). Image courtesy of New York Pubic Library.
The old notion about lawsuits was that people and some businesses filed complaints for no good reason. The lawsuits and the people who filed them were mostly thought of as frivolous. They served no purpose, it was thought, other than to cost the defendants time and money.
Today lawsuits are judged by whether the judge thinks the lawsuit is "plausible" from the beginning. This test was thought up by a Federal judge, naturally. "Plausible" means not just "possible" but whether a judge thinks that the lawsuit is "believable," somewhere between the merely "possible" and the definitely "probable" (although the opinions expressed by judges in decided cases are much closer to declarations that the judges have to be convinced that the lawsuit is believable meaning probably true, or they will throw out the lawsuit).
Using this subjective procedure, perhaps insupportable complaints have been replaced by definitely unsupported judgments.
Under the plausibility test, again meaning whether a judge thinks that a complaint or a lawsuit has a believable if not probably true story to tell, plaintiffs and defendants both can file exhibits either to show the judge that the complaint is plausible, or to show the judge that it is not.
This is what happened in an insurance case in which the defendants raised an affirmative defense called the filed rate doctrine. When we started this discussion, we promised that we would illustrate how the plausibility test determines outcomes, by taking a look at how judges look at motions to dismiss insurance cases because of the filed rate doctrine.
In Rothstein v. Balboa Insurance Co., 794 F.3d 256 (2d Cir. 2015), the defendants filed their motion to dismiss and they filed exhibits to show the trial judge that the force-placed insurance complaint in that case was just not plausible. The trial judge still thought that the complaint was plausible anyway. The appellate judges thought otherwise, and reversed with directions to grant the defendants' motion to dismiss the complaint because of the filed rate doctrine. Judgment for the defendant on a motion to dismiss.
The appellate panel unfortunately was mistaken in what the defendants' exhibits said about the law of one state, New Hampshire. The appellate panel misread the exhibits to reflect the opposite of what the New Hampshire Insurance Commissioner had to say. See Dennis J. Wall, "Force-Placed Insurance Rothstein v. Balboa Insurance Co. (2d Cir.)," 37 Insurance Litigation Reporter 435 (October 2015), available for download at www.lenderforceplacedinsurance.com.
However, the appellate panel did not say what they thought the exhibits revealed about the law of the other two states at issue in that case, namely, New York and Texas. For the panel, although not for the trial judge it bears repeating, it was enough to dismiss the complaint based on the defendants' allegation that the complaint was implausible and the defendants did not apparently have to do any more than say so.
At any rate, that is all that the appellate panel needed to hear before they ordered the complaint dismissed, i.e., that the defendants said that the complaint was implausible under the filed rate doctrine.
Was the appellate panel correct in not looking to whether the state laws at issue would authorize the filed rate doctrine defense to be applied?
Or is more required to prove that the filed rate doctrine defense applies than was required in Rothstein, at least on appeal?
In further articles, we will take a look at the answers to those questions.
WHEN "PLAUSIBLE" LAW MEANS "imPLAUSIBLE" JUDGMENTS.
The "plausibility" standard determines whether a complaint in Federal Court states a claim upon which relief can be granted. The results of applying that standard have not received much discussion. They should receive more attention than they and the "plausibility" standard have gotten. One of the only known treatments of this topic is in a recent blog post by Dennis J. Wall & Casey Hall, "Changing Plaintiffs' Standard Gives Defendants Cheap Judgments: Unintended Consequences?" Thomson Reuters Legal Solutions Blog, posted February 24, 2016.
The old notion that somehow "implausible" complaints survived in Federal Courts has been replaced with the present reality that implausible judgments are often -- "regularly" may be nearer the truth of the matter -- given to the other side of the litigation.
When current judges think that claims are "implausible," the claims are dismissed with prejudice. Experienced practitioners know that judges generally allow a plaintiff to amend at least once even after the defendant files its answer, but this is not always followed in cases applying the "implausibility" standard of jurisprudence.
Courts enter a final judgment and direct the clerk to close a case each time they dismiss a complaint with prejudice. This means of course that the plaintiffs have no opportunity thereafter to amend to even try to allege a claim which the given judge sees as more "plausible."
This procedure is illustrated by the constantly increasing results in an equally increasing number of insurance cases in Federal Courts. In these cases, defendants raise the filed rate doctrine in motions to dismiss the complaints as "implausible."
The FRD originated in utilities regulation. There, it is an affirmative defense. As an affirmative defense, the FRD has required defendants who raise it, to meet their burdens of proof on several elements.
One element which must be proven in utilities cases is that the rate in question was approved by a regulatory agency which was given the statutory power to approve the rate. The power to approve a rate request involves the power to require a lesser rate. It also involves the power to require certain documentation and other evidence, among other things.
Another element which must be proven in utilities cases is that the utility filing the rate request is required to address certain issues and submit listed documentation, all of which are identified in applicable statutes and regulations. In Florida, for example, insurance rate filings are governed both by Statute and by Regulation. This required element of proof was more fully addressed in previous articles here, here, and here.
In contrast to the law applied in utilities regulation matters, courts faced with insurance and other cases often fail to require any proof that the filed rate doctrine applies at all. Perhaps the judges simply do not know how to apply the FRD in an insurance case, the doctrine having been imported from utilities regulation. In any event, this lack of proof does not prevent judges from entering judgments based on the FRD in insurance cases.
The decided cases will be examined here in a forensic investigation never before conducted, so far as is known. More than that, the results of that forensic examination will be put on display for you to see for yourself.
HAPPY VALENTINE'S DAY: FILED RATE DOCTRINE AND INSURANCE CASES.
Courthouse and Lake Eola, Florida. Image Courtesy of New York Public Library Collection.
The filed rate doctrine began life in utilities regulation. It was made by judges to prevent ratepayers from filing lawsuits for lower regulated rates than what they could get from the regulators.
Now it has surfaced in the past several years in insurance cases. Lawyers and judges who are not at all familiar with the filed rate doctrine are now raising it, arguing it, and applying it, they think, in places and cases where it was never meant to go.
See, e.g., Case Summary, Force-Placed Insurance Rothstein v. Balboa Insurance Co. (2d Cir.) Filed rate doctrine imported from utilities regulation to insurance law, 37 Insurance Litigation Reporter 435 (2015).
The filed rate doctrine flies into our radar coverage in the next several articles posted here.
PLEADING AND PROVING FILED RATE DOCTRINE IN INSURANCE CASES: PART 1.
Courthouse in Newburgh, New York. Image courtesy of the New York Public Library Collection.
Most courts hold that the filed rate doctrine is an affirmative defense. Other courts hold a minority view that the filed rate doctrine is inherent in subject-matter jurisdiction. The confusion is understandable. Judges in cases subject to the doctrine must decline to exercise jurisdiction in deference to regulators empowered to review and decide rate filings.
Either way, whether viewed as an affirmative defense or as an attack on subject-matter jurisdiction, the judges all agree that the party raising the filed rate doctrine has the burden of proving it.
This means evidence of course. In Florida, for example, in cases involving one of the larger force-placed insurance carriers, American Security Insurance Company ("ASIC"), the Florida Office of Insurance Regulation, i.e., Insurance Commissioner's Office, actually denied ASIC's rate request in a rate filing ASIC filed in support in 2013. I filed comments in the rate filing proceeding in which which the O.I.R. denied ASIC's request for another rate increase.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 § 11
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.