The suit arose out of an arrangement where lenders would refer borrowers to (now-defunct) Triad Guaranty Insurance Company (Triad) to obtain private mortgage insurance. The lender-affiliated captive insurance company would then reinsure the policies issued by Triad.  The Illinois Director of Insurance, who brought the suit on behalf of Triad, alleged that the captive insurer had (1) breached the reinsurance contract by failing to provide certain disclosures required by law, (2) breached the covenant of good faith and fair dealing by referring only the mortgages with the highest risk of default to Triad, (3) violated the Real Estate Settlement Procedures Act (RESPA) by accepting “kickbacks” in connection with the referral of business incident to a real estate settlement service, and (4) was unjustly enriched because the reinsurance premiums grossly exceeded the value of the reinsurance provided.

The court disagreed on all counts. The breach of contract claim failed because the reinsurance contract did not require that the disclosures at issue be provided; and even if the contract did require the disclosures, the Director failed to specify the damages that resulted from the alleged lack of disclosure.  Regarding the good faith and fair dealing count, the captive insurer did not breach the covenant because the contract did not contain any express provisions relating to the discretion the captive insurer allegedly failed to exercise in good faith.  Regarding the RESPA count, the  claim was time barred because it accrued years earlier at the time each underlying mortgage was executed, and not at the time each allegedly illegal “kickback” was made.  Finally, regarding the unjust enrichment count, the claim was precluded because a contract (the reinsurance agreement) governed the relationship between the parties.  Illinois ex rel Hammer v. Twin Rivers Ins. Co., Case No. 16-C-7371 (USDC N.D. Ill. July 5, 2017).