This is the next in a continuing series of articles reprinted from the manuscript of the author's article published by Westlaw Publishing Co., "Force-placed, Lender-placed Insurance Class Actions: Is the Lender Placement of Insurance Authorized by Law, Or Simply Beyond the Reach of the Courts?", 35 Insurance Litigation Reporter 221 (2013) © 2013 Thomson Reuters. Installments in this series will alternately be presented here and on Insurance Claims and Issues Blog. Permission to reprint from the author's manuscript is given by John K. DiMugno, Esquire, Editor-in-Chief of ILR, by Thomson Reuters Westlaw, and by the author.
Defenses to FPI claims often include the alleged defense of "voluntary" payment of FPI premiums. This installment explores the Courts' treatment of that defense.
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3. The Voluntary Payment Doctrine. Some defendant lenders and mortgage servicers have raised the voluntary payment doctrine as a defense appearing from the face of the putative class action complaint, which bars any claim upon which relief can be granted. It was noted earlier in this article that every one of the force-placed insurance, putative Federal class action cases which have been found, involves the plaintiffs-borrowers' payment of the force-placed insurance premium.[1] "The voluntary payment doctrine is an affirmative defense that bars the recovery of money that was voluntarily paid with knowledge of the facts."[2]
The voluntary payment doctrine is not applied to cases in which payments are made involuntarily, or in which the payments are clearly made under duress, or in which the payments are coerced. The voluntary payment doctrine has not been applied in favor of defendants filing Rule 12(b)(6) motions in force-placed insurance cases, and the voluntary payment doctrine has been rejected as a ground to dismiss claims in such cases.[3]
[1] As was noted earlier, sometimes the plaintiffs in these cases allege that they paid the premiums directly to their lender or to the insurance company, and sometimes the plaintiffs in these cases allege that their mortgage escrow accounts are charged for the force-placed premiums.
[2] Ellsworth v. U.S. Bank, N.A., 2012 WL 6176905 *14 (N.D. Cal. December 11, 2012)(Beeler, USMJ).
[3] See, e.g., Kolbe v. BAC Home Loans Servicing, LP, 695 F.3d 111, 125 (1st Cir. 2012)(applying New Jersey law); Ellsworth v. U.S. Bank, N.A., 2012 WL 6176905 *14 (N.D. Cal. December 11, 2012)(Beeler, USMJ).
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