Almost a decade after regulators first heard allegations that carriers were paying bribes to mortgage agents who had purchased insurance policies underwritten by lenders, a federal appeals court asked the Washington Supreme Court to help resolve one of the latest lawsuits over alleged abuse.

The 9th Circuit Court of Appeal on December 31 asked the state high court whether unjust enrichment and racketeering claims by a landlord are prohibited by a judicial principle known as the “filed rate doctrine”. Essentially, the 9th Circuit wants to know if a lawsuit against a NationStar Mortgage affiliate fails because the owner was charged a rate that had been filed with the Washington State Insurance Commissioner.

“Because this critical state law issue remains unresolved, we have concluded that the proper course of action is to certify the issues relating to this issue to the Washington State Supreme Court, and we respectfully request let her provide the answer, “said the 9th Circuit. in its order.

Almost all mortgage contracts include an obligation for the borrower to obtain adequate insurance. If a homeowner allows coverage to expire, the mortgage agent will purchase a policy placed by the lender or forced to protect the creditor.

In 2012, the Center for Economic Justice accused two insurers – Assurant and QBE / Balboa – of controlling 98% of the homeowner’s insurance market placed by lenders and charging them excessive rates while paying ” commissions ”and other fees to mortgage agents who have purchased policies. while charging the cost to the owners.

ECJ Executive Director Birny Birnbaum, former chief economist of the Texas Department of Insurance, told a hearing before the National Association of Insurance Commissioners that insurance regulators have allowed “reverse competition” to take hold. develop in the credit insurance market because the higher the cost of credit insurance. insurance plus mortgage services have made money on commissions. He said LIP insurers enjoy loss rates below 20%.

Homeowners who were forced to pay premiums for insurance placed by a lender have filed at least four lawsuits against NationStar Mortgage and its subsidiary Harwood Service Co., according to a federal court cases database. Some of these lawsuits cite Birnbaum’s testimony before the NAIC to substantiate allegations that insurers were paying illegal bribes and excessive fees to mortgage agents while charging excessive rates.

Two of those lawsuits were settled and a third was dismissed after state attorneys general filed a lawsuit against insurers and Fannie Mae and Freddie Mac overhauled mortgage service rules. However, a 2015 lawsuit filed by Seattle owner Spencer Alpert remains unresolved.

NationStar’s mortgage department Harwood purchased a policy placed by a lender on Alpert’s house in Seattle’s Blue Ridge neighborhood in 2012, after Safeco canceled its policy because it had failed to remove moss from the roof of the house. The annual cost of the policy of $ 5,088 was charged to Alpert’s escrow account.

The Associated Press reported in 2014 that Harwood the previous year had collected $ 40 million in commissions for $ 200 million in insurance billed to homeowners. Federal Housing Finance Agency rules, state regulators, and class action lawsuits now prohibit such commissions.

Alpert filed a complaint in 2015 accusing Nationstar and Harwood of accepting bribes from Assurant subsidiaries and charging excessive rates. The lawsuit says Alpert was forced to pay $ 17,318 for insurance from October 2012 through July 2015, when he purchased a new policy with an annual premium of $ 1,369.

“It should be noted that Commerce West insurance coverage includes coverage for personal property, liability and other risks included in the defendant Nationstar / Assurant’s enforced policies,” the lawsuit said.

But U.S. District Judge Richard A. Jones noted that the doctrine of the rates filed bans Alpert’s bribe claims. Jones wrote in his order that Alpert was essentially asking for a refund on the premiums he paid. If the court granted that request, he said, it would make the rates filed by insurers unfair, as other homeowners who paid premiums would not receive the same refund.

In deciding on Alpert’s appeal, the 9th Circuit noted that Nationstar and Harwood are middlemen – they did not file the rate in question themselves.

“As a result, we are faced with the question of whether, under Washington law, the filed rate doctrine applies to situations where the filed rate is billed by an intermediary and not by the regulated entity that filed the rate, ”the court said.

While the Supreme Court awaits the response from the Washington Supreme Court, controversy over the regulations governing the policies placed by lenders continues.

A lender-based insurance working committee appointed by the National Council of Insurance Commissioners completed work in December on a model law to govern the practices of lender-based insurers. It will be reviewed by the NAIC’s executive committee at its national spring committee, a spokesperson for the organization said.

Birnbaum said in an interview that the proposed model law does nothing more to “memorize” current practices used by carriers and makes no significant changes to combat excessive fares.

Birnbaum also takes issue with Nationstar’s argument that the filed tariff doctrine prohibits Alpert’s assertion.

“It makes no more sense to invoke the doctrine of the rate deposited for qualified charges of insurance from a service agent to a borrower than to invoke the FRD for a charge from a landlord to a qualified tenant. insurance, ”he said.