Forced Place Insurance: Washington Supreme Court Holds Lenders are Protected by the Filed Rate Doctrine

By Financial Services Industry Group

In an opinion issued on September 2, 2021, the Washington Supreme Court held that the filed rate doctrine may be applied to lenders or mortgage servicers implementing forced place insurance when there is a direct attack on agency approved rates.[1]

What is the filed rate doctrine?

Many state laws require insurance companies to file and maintain their rates with an agency that approves that rate. In Washington, insurance companies must file the insurance product with the Washington State Office of the Insurance Commissioner (“OIC”) for approval. Once the filed rate has been approved, the rates are per se reasonable, and filers are immune from attack on the OIC approved rates. This doctrine serves two purposes, to preserve OIC’s primary jurisdiction to determine what insurance rates are reasonable and to ensure regulated entities only charge the rates approved by OIC. In McCarthy[2], the Washington Supreme Court previously held that the filed rate doctrine only applies if the claims or damages sought directly attacked OIC approved rates and would require a court to reevaluate OIC’s judgment.

Case Summary

Plaintiff Alpert had a mortgage serviced by Defendant Nationstar under which Albert was required to maintain insurance on his property. Pursuant to the mortgage agreement, Nationstar purchased insurance to cover Alpert’s property, also known as “force placed insurance” or “lender placed insurance” when Alpert failed to maintain insurance on his own. The insurance policy was underwritten by insures and passed through a broker to Nationstar who then billed Alpert. Alpert brought suit, claiming among other things, that the insurance provider, broker, and mortgage servicer engaged in an unlawful kickback scheme to inflate his premiums.

Defendant Nationstar argued that the filed rate doctrine protected parties other than those who file the rates themselves. Taking guidance from recent federal court opinions, the Court concluded that the filed rate doctrine applies to transactions where the doctrines underlying purposes, preserving agencies’ primary jurisdiction and preventing unfair discrimination are undermined. As the filed rate doctrine exists to ensure courts do not second guess the judgment of the OIC, allowing intermediaries to be sued regarding the validity or reasonableness of insurance rates would undermine the purpose of the doctrine. However, the Court declined to create a categorical exemption and held that the applicability of the filed rate doctrine to any intermediary will be case dependent and apply where awarding damages squarely attacks the filed rate on allegations run squarely against the filed rate.

[1] Alpert v. Nationstar Mortgage LLC, et. al., No. 99377-7 (certified C19-35867), 2021 WL 3923297 (Wash. Sept. 2, 2021).

[2] See McCarthy Fin., Inc. v. Premera, 182 Wash.2d 936 (2015).