TORTIOUS INTERFERENCE, NOT INSURANCE BAD FAITH Continued.

    Following now-established case law, the Court in Novell v. Bank of America Corp., No. 14-CV-80672-RLR, 2014 WL 7564678 (S.D. Fla. December 3, 2014), has held, based on case law involving an insurance company offering force-placed insurance for sale to lenders and mortgage servicers, that mortgage servicers are exposed to tort liability for tortious interference with the preexisting mortgage contract relationship between even unknown investors/mortgagees, on the one hand, and the homeowners-borrowers on the other hand.

    Given "murky" Florida Supreme Court precedent on whether Florida recognizes two torts in such situations -- one, for tortious interference with contract, and another, for tortious interference with a preexisting business relationship,  the Court in this case did not require the plaintiff homeowners "to allege a breach of the underlying mortgage agreement."  Novell v. Bank of America Corp., No. 14-CV-80672-RLR, 2014 WL 7564678, *5 (S.D. Fla. December 3, 2014).  The plaintiffs alleged tortious interference with their business relationship with their unknown mortgagee/investor (which purchased the right to receive payments on their mortgages).  The Court held the plaintiffs' allegations sufficient to withstand motions to dismiss filed by:

1. Bank of America, an alleged mortgage servicer;
2. Balboa Insurance Services, BofA's subsidiary until Balboa was sold;
3. QBE Holdings, Inc., which bought Balboa; and
4. Seattle Specialty Insurance Services, Inc.

    Defendants Balboa and Seattle allegedly "received 'unearned commission from the various surplus lines insurers issuing force-placed flood insurance coverage.'"   The Court held that the plaintiffs' allegations alleged actionable claims for tortious interference against all defendants:

Although it was Defendant Bank of America that was in effect alleged to have force-placed insurance onto Plaintiffs, via its role as servicer, the allegations in this case extend towards all of the Defendants acting together, with knowledge of Plaintiffs' relationship, for the sole purpose of profiting via the forced-place insurance. See Hamilton, 6. F.Supp.3d, at 1321 (“While SunTrust was entitled to procure insurance when Plaintiffs failed to maintain coverage their properties, nothing permitted SunTrust and the QBE Defendants to collude to force-place excessive and exorbitantly-priced insurance to maximize their profit at Plaintiffs' expense.”).

In another force-placed insurance case, based on slightly different allegations, the Court found that the Defendant-insurer “acted in bad faith when charging excessive and unwarranted fees and when paying/receiving improper commissions and kickbacks” and that by doing so the defendant interfered with the plaintiff's relationship with its loan servicer. Williams v. Wells Fargo Bank N.A., No. 11–21233–CIV, 2011 WL 4368980, *12 (S.D.Fla. Sept. 19, 2011).

 

Here, Plaintiffs allege similar conduct, but that such conduct interfered with Plaintiffs' relationship with the investor. Regardless, allegations that Defendants' agreement to force-place inflated insurance resulting in Plaintiffs' increased indebtedness, viewed in the light most favorable to Plaintiffs, adequately support a claim for direct interference.

 Novell v. Bank of America Corp., No. 14-CV-80672-RLR, 2014 WL 7564678, *6-*7 (S.D. Fla. December 3, 2014).

    So, when there is no basis for insurance bad faith there can still be liability for tortious interference with a business relationship.  This issue is also explored on Insurance Claims and Issues Blog in an article posted on Dr. King's Birthday observed.

The author is at work on a book on "Lender Force-Placed Insurance" scheduled for publication by the American Bar Association in Spring 2015.

Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall.  All rights reserved.  No claim to Original U.S. Government Works.