The filed rate doctrine can often provide a strong defense to an insurer in a class action claiming that insurance premiums were too high for some reason. A recent Second Circuit decision applied the doctrine broadly. This decision is likely to be helpful to insurers in future cases.

Rothstein v. Balboa Insurance Co., No. 14-2250-cv, 2015 U.S. App. LEXIS 12623 (2d Cir. July 22, 2015), was one of numerous putative class actions that have been filed involving “forced-placed” homeowners insurance. Where a mortgage borrower does not maintain homeowners’ (or, where required, flood) insurance on his or her home, the lender has the right to purchase a policy to protect its interests, and charge the premium to the borrower. The policy purchased by the lender is typically called a “forced-placed” or “lender-placed” policy. In Rothstein, the plaintiffs alleged “that they were fraudulently overbilled because the rates they were charged did not reflect secret ‘rebates’ and ‘kickbacks’ that GMAC [the lender] received from Balboa through Balboa’s affiliate, Newport Management Corporation.” Id. at *2. The central allegation was that Newport provided certain “loan tracking services” to GMAC at no charge, which reduced GMAC’s expenses, in exchange for GMAC agreeing to buy lender-placed insurance exclusively from Balboa. While GMAC charged the plaintiffs the filed rates for the insurance, the plaintiffs alleged that the rates should have been discounted because of the benefit of the services being provided by Newport. Id. at *6.

The Second Circuit, reversing the denial of a motion to dismiss, held that “a claim challenging a regulator-approved rate is subject to the filed rate doctrine whether or not the rate is passed through an intermediary,” and “[t]he claim is therefore barred if it would undermine the regulator’s rate-setting authority or operate to give the suing ratepayer a preferential rate.” Id. at *3. The Second Circuit further explained that plaintiffs’ theory could succeed only if the services provided by Newport were required to be reflected in the rates, and “it is squarely for the regulators to say what should or should not be included in a filed rate.” Id. at *10-11.

As this decision demonstrates, the filed rate doctrine is a defense worth considering in cases that involve insurance premiums.

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