United States District Court, E.D. Pennsylvania
GERALD LAFFAN, individually and on behalf of all others similarly situated, Plaintiff,
SANTANDER BANK, N.A., AMERICAN MODERN INSURANCE GROUP, INC., and ATLAS INSURANCE AGENCY, INC., Defendants.
JEFFREY L. SCHMEHL, District Judge.
Before the Court is the motion to dismiss of Defendant, Santander Bank, N.A. ("Defendant" or "Santander") (Docket No. 37). Plaintiff, Gerald Laffan ("Plaintiff" or "Laffan") has opposed the motion, and Defendant has filed a reply. Further, both Plaintiff and Defendant have filed Notices of Supplemental Authority (Docket Nos. 45 and 59) and have each replied to said notices. (Docket Nos. 50 and 61.) Having read the parties' briefing, heard the parties' positions and taken the matter under advisement, I will deny the motion to dismiss of defendant Santander.
Plaintiff filed the class action complaint in this matter on July 11, 2013 (Docket No. 1), challenging various aspects of Santander's policy to require borrowers to pay for force-placed hazard insurance on properties secured by Santander mortgages when borrowers allow their hazard insurance to lapse. Specifically, Plaintiff's Complaint asserts four claims against Santander: 1) breach of the implied covenant of good faith and fair dealing; 2) breach of contract; 3) breach of fiduciary duty/misappropriation of funds held in trust and 4) violation of the New Jersey Consumer Fraud Act. (See Compl.)
II. STATEMENT OF FACTS
On September 27, 2011, Plaintiff obtained a mortgage loan from Santander in the amount of $616, 000 in order to purchase property located at 720 Willow Avenue, Unit 3, Hoboken, New Jersey. (Compl. ¶ 35.) The mortgage states, in pertinent 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 other hazards, including, but not limited to, earthquakes and floods, for which Lender requires insurance. This insurance shall be maintained in amounts (including deductible levels) and for the period that Lender requires. What Lender requires pursuant to the preceding sentences can change during the term of the Loan. The Insurance carrier providing the insurance shall be chosen by Borrower subject to Lender's right to disapprove Borrower's choice, which right shall not be exercised unreasonably...
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 or 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 the insurance coverage so obtained might significantly exceed the cost of the insurance that Borrower could have obtained.
(Compl., Ex. 1.) The mortgage also states in section 9 that if "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." (Compl., Ex. 1.) Plaintiff obtained hazard insurance, as required by the mortgage, with FMI Insurance Company for $633 annually. (Compl. ¶¶ 82-84.)
On September 19, 2012, Plaintiff's FMI policy lapsed. (Compl., ¶ 85.) On October 19, 2012, Plaintiff received notice that his policy had lapsed, and that "sufficient insurance coverage is required to be in force at all times." (Compl., ¶ 86.) Plaintiff did not attempt to obtain hazard insurance after his FMI policy lapsed. Thereafter, on January 1, 2013, Santander purchased lender-placed hazard insurance on the property through Defendant American Modern Insurance Group ("AMIG"). (Compl., ¶ 87.) The effective date of this insurance was October 9, 2012, and the policy provided the same level of coverage that Plaintiff's FMI policy had provided. (Compl., ¶¶ 87-88.) Plaintiff was charged $1, 360 for this policy. (Compl. ¶ 87.)
On April 24, 2013, Plaintiff purchased hazard insurance from Great Northern Insurance Company for $696.19, and Santander cancelled the AMIG policy. (Compl., ¶¶ 89, 91.) Santander refunded the unused premium amount, but did not refund the premium for coverage from October 9, 2012 to April 23, 2013. (Compl., ¶ 91.)
In essence, Plaintiff is alleging that "Defendants colluded with one another to exploit borrowers by utilizing the force-placement of hazard insurance as an illegitimate profit center fueled by kickbacks, backdated coverage, and overcharges for force-placed insurance." (Pl's Br. in Opposition to Def's Mtn to Dismiss, p. 2.)
III. STANDARD OF REVIEW
To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must allege facts that "raise a right to relief above the speculative level.'" Victaulic Co. v. Tieman , 499 F.3d 227, 234 (3d Cir.2007) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007.) In determining whether a complaint is sufficient, the court must accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading, the plaintiff may be entitled to ...