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Richard v. Finance of America Mortgages LLC

United States District Court, M.D. Pennsylvania

July 23, 2019


          Mariani Judge.


          Martin C. Carlson United States Magistrate Judge.


         This is a case about insurance and what kind of indemnification may be owed to the plaintiff, Wilson P. Richard, for two separate incidents of water damage that occurred at Wilson's home in Jim Thorpe, Pennsylvania in March 2016 and February 2017.

         Wilson's complaint, which has been amended three times, (Docs. 1, 33, 69, 93), recites that Richard has been harmed by a course of conduct that resulted in the cancellation of his original homeowner's insurance and the substitution of a lender force-placed insurance policy[1] in 2016, which provided him with less coverage at the time that he experienced property damage losses in 2016 and 2017. Richard has pursued these claims in a global, comprehensive fashion, bringing this action against his mortgagee, a mortgage servicing company, two insurance companies and an insurance agency, seeking damages he claims he is owed for water damage to his home. Richard has sued these parties collectively in an attempt to affix blame at the foot of at least one of these companies so that he can be indemnified against the losses he claims he incurred.

         Wilson's approach to this case, while perhaps understandable given the number of actors who played a role in this mortgage servicing and homeowner insurance, is flawed since his efforts to cast a wide net in the hopes of recovering damages both reveals some hard truths and sweeps up parties who cannot be held liable for the losses allegedly suffered here. We have previously noted this shortcoming in Richard's pleadings when we dismissed claims lodged by the plaintiff against QBE, the insurance company whose policy was cancelled in December 2015, months before the losses which form the gist of this lawsuit. Richard v. Fin. of Am. Mortgages, LLC, No. 3:18-CV-559, 2019 WL 1980693, at *9 (M.D. Pa. May 3, 2019).

         The instant motion to dismiss, filed by Ocwen Loan Servicing, LLC (“Ocwen”), reveals some of the same shortcomings of this far-reaching approach to this litigation. Indeed, the history of Ocwen's involvement in this litigation underscores the tenuous nature of the plaintiff's claims against this loan servicer. Richard named Ocwen as a defendant in his original complaint, (Doc. 1), but then voluntarily dismissed Ocwen without prejudice in June of 2018 after it appeared that Ocwen was not the loan servicer on this mortgage at the time of the critical events in this complaint. (Doc. 34.) Some five months later, Richard filed a second amended complaint and third amended complaint, which renewed his previously dismissed claims against Ocwen, alleging that Ocwen, along with the other named defendants, violated the Real Estate Settlement and Procedure Act (RESPA), and breached its contract with the plaintiff. (Doc. 69 and 93.) Ocwen has now moved to dismiss the claims brought against them in these amended complaints. (Doc. 81.)[2]

         The fundamental premise behind Ocwen's motion can be succinctly stated: The critical events that led to Richard's alleged injuries were the lapsing of Richard's initial homeowner's policy, which occurred on December 12, 2015, and the decision to substitute a significantly less comprehensive lender-placed insurance policy for this lapsed policy in February of 2016. According to Ocwen, both of these events took place after Ocwen had ceased acting as the mortgage servicer since Ocwen transferred these loan servicing responsibilities to Finance of America on December 2, 2015. Therefore, Ocwen argues that it cannot be held responsible to Richard for events that occurred after it relinquished its loan servicing responsibilities.

         This motion to dismiss is fully briefed and ripe for disposition. Upon consideration, and for the reasons discussed below, we recommend that the motion be granted.


         The well-pleaded facts, which guide our determination of this motion, are set forth in Richard's third amended complaint, (Doc. 93), which recites as follows:

         On or about December 12, 2014, Richard purchased the house located at 12 Poplar Drive, Jim Thorpe, Pennsylvania. (Doc. 93, ¶ 14.) Richard financed the home purchase through a loan issued by Gateway Funding Diversified Mortgage Services, LP (“Gateway”), now known as Finance of America Mortgage LLC (“Finance of America”). (Id.) As part of his loan obligations, Richard issued a mortgage to the lender, and the mortgage required that he escrow real estate taxes and property insurance premiums. (Id., ¶ 15.)

         Prior to closing on the property, Richard contacted Progressive Specialty Insurance Agency, Inc. (“Progressive”), and requested assistance in obtaining a homeowner's insurance policy. (Id., ¶ 16.) Through Progressive, Richard secured a policy of insurance from QBE bearing policy number QHP3209975 for the policy period beginning December 12, 2014, through December 12, 2015 (the “QBE Policy”). (Id., Ex. B.)

         Immediately after closing on Richard's loan, Gateway transferred loan servicing responsibilities to Ocwen. (Id., ¶ 19.) Richard alleges that the premiums owed on the QBE Policy were to be paid out of his mortgage escrow account, which was managed by Ocwen on behalf of Finance of America. (Id., ¶ 20.) It is undisputed, however, that Ocwen returned servicing rights on Richard's loan to Finance of America on December 2, 2015, ten days prior to the expiration of the QBE policy, although Richard alleges that Ocwen erroneously represented that it had paid these insurances premium prior to the expiration of the policy from monies held in escrow. (Id., ¶ 21.)

         According to Richard, Finance of America and/or Ocwen received notice of the non-renewal of this policy[3] but Finance of America, which now had responsibility for servicing this loan, failed to make the payments necessary to avoid cancellation or non-renewal of the QBE Policy on December 12, 2015. (Id., ¶¶ 21-23.) After failing to make the required payments, the QBE Policy lapsed, and Finance of America obtained a lender force-placed insurance policy with Great American, which commenced on February 1, 2016, as a replacement for the QBE Policy. (Id., ¶ 23.) According to Richard, Finance of America failed to notify him of its intent to obtain forced placed insurance until March 1, 2016. (Id., ¶24.) There is no dispute that, pursuant to its terms, the Great American Policy expressly excluded Richard as the mortgagor from coverage under the policy and provided no insurance coverage for the mortgagor's interest or equity in the property. (Doc. 45, Ex. A.)

         Approximately six weeks after Finance of America took out this force-placed insurance policy in February of 2016, and two weeks after Finance of America notified Richard of its intention to take out such insurance coverage, Richard suffered the first water damage loss on his home on March 15, 2016. (Id., ¶ 25.) Eleven months later, in February 2017, the property sustained water damage for a second time as a result of ruptures to a faucet on the second floor of the home. (Id. ¶ 33.) Richard alleges that the losses to the property totaled nearly $77, 000, and he filed claims with the lender-placed insurance carrier, Great American. (Id., ¶¶ 25-33.) Richard asserts that Great American failed to cover some part of the damages claimed, and he filed the instant action against Ocwen and the other remaining defendants seeking to recoup the monies he claims were spent or are otherwise needed to repair the property.

         With respect to Ocwen, several undisputed facts emerge from this chronology set forth in Richard's amended complaint. First, notwithstanding the allegation that Ocwen may have misstated the payment status on this policy, it is evident that Ocwen relinquished its loan servicing responsibilities on December 2, 2015, ten days prior to the expiration of the QBE insurance policy. Therefore, Ocwen had no contractual and legal loan servicing responsibilities on this policy after December 2, 2015. Consequently, Ocwen was not the loan servicer when this policy expired, played no role in the subsequent decision of Finance of America to acquire force-placed insurance coverage in Richard's property in February of 2016, and had no obligation to provide notice to Richard of these policy changes. Finally, Ocwen played no role in the servicing of Richard's loan at the time the losses that form the basis of this complaint took place, on March 15, 2016 and February of 2017.


         Ocwen has moved to dismiss the plaintiff's complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, arguing that the complaint fails “to state a claim upon which relief can be granted.” With respect to this benchmark standard for legal sufficiency of a complaint, the United States Court of Appeals for the Third Circuit has aptly noted the evolving standards governing pleading practice in federal court, stating that:

Standards of pleading have been in the forefront of jurisprudence in recent years. Beginning with the Supreme Court's opinion in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) continuing with our opinion in Phillips [v. County of Allegheny, 515 F.3d 224, 230 (3d Cir. 2008)]and culminating recently with the Supreme Court's decision in Ashcroft v. Iqbal __U.S.__, 129 S.Ct. 1937 (2009) pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss.

Fowler v. UPMC Shadyside, 578 F.3d 203, 209-10 (3d Cir. 2009).

         In considering whether a complaint fails to state a claim upon which relief may be granted, the Court must accept as true all allegations in the complaint and all reasonable inferences that can be drawn there from are to be construed in the light most favorable to the plaintiff. Jordan v. Fox Rothschild, O'Brien & Frankel, Inc., 20 F.3d 1250, 1261 (3d Cir. 1994). However, a court “need not credit a complaint's bald assertions or legal conclusions when deciding a motion to dismiss.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Additionally, a court need not “assume that a ... plaintiff can prove facts that the ... plaintiff has not alleged.” Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). As the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), in order to state a valid cause of action a plaintiff must provide some factual grounds for relief, which ...

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