holding the 7 ultimate question of insurance coverage should be determined by a jury
How later courts described this case
- holding the 7 ultimate question of insurance coverage should be determined by a jury
Written by the judges who cited it.
The opinion
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8 UNITED STATES DISTRICT COURT
9 EASTERN DISTRICT OF CALIFORNIA
10
11 NICOLE HICKCOX, No. 2:22-cv-00437-TLN-KJN
12 Plaintiff,
13 v. ORDER
14 ROCKET MORTGAGE, LLC,
15 Defendant.
16
17 This matter is before the Court on Plaintiff Nicole Hickcox (“Plaintiff”) and Defendant
18 Rocket Mortgage, LLC’s (“Defendant”) Cross-Motions for Summary Judgment. (ECF Nos. 32,
19 39.) Both motions have been fully briefed. For the reasons set forth below, the Court hereby
20 DENIES Plaintiff’s motion (ECF No. 32) and DENIES in part and GRANTS in part Defendant’s
21 motion. (ECF No. 39.)
22 ///
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28 ///
1 I. FACTUAL AND PROCEDURAL BACKGROUND1
2 This case arises out of a dispute regarding home insurance coverage. On October 15,
3 2019, Plaintiff executed a promissory note in favor of Defendant, in the amount of $171,762 (the
4 “Note”) to refinance real property located at 4371 Par k Woods Dr., Pollock Pines, California,
5 95726 (the “Property”). (ECF No. 41-1 at 2.) That same day, Plaintiff executed and granted a
6 Deed of Trust in favor of Defendant on the Property to secure payment for the Note. (Id.) The
7 Note and Deed of Trust will be collectively referred to as the “Refinance Loan.” (Id.) Defendant
8 is the originator and servicer of the Refinance Loan. (Id.)
9 The Deed of Trust requires Plaintiff to maintain hazard insurance on the Property. (Id.)
10 In July 2019, prior to closing the Refinance Loan, Plaintiff obtained two different hazard
11 insurance policies: one from California Fair Plan (“CFP”) and one from California State
12 Automobile Association (“CSAA”). (Id. at 3.) AAA acted as Plaintiff’s broker. (Id. at 5.) The
13 Deed of Trust also requires Defendant to hold Plaintiff’s funds in escrow for the purpose of
14 paying insurance premiums as they come due. (Id. at 2–3.) Defendant acts as a fiduciary of this
15 escrow account. (ECF No. 39-6 at 2.)
16 When Defendant originated the Refinance Loan in its system, Defendant incorrectly
17 inputted the CSAA policy as the top line policy. (ECF No 41-1. at 4–5.) If the policies had been
18 put into Defendant’s system correctly, the CSAA payment would have been sent to AAA, while
19 the CFP payment would have gone to CFP directly. (Id. at 5.) Because the policies were entered
20 into Defendant’s system incorrectly, Defendant did not send CFP any money and instead sent
21 AAA money for both the CFP policy and the CSAA policy. (Id.) When AAA received this
22 overpayment, it issued Plaintiff a direct refund for the CFP policy amount but did not notify
23 Defendant of the mistake. (Id. at 6.) Due to Defendant’s failure to pay the CFP premium, the
24 policy lapsed in January 2020. (ECF No. 39-6 at 7.)
25 On March 16, 2020, Plaintiff suffered damage to the exterior deck of her home (the
26 “Loss”). (ECF No. 41-1 at 6.) The parties dispute the specific cause of the Loss. (See ECF No.
27
28 1 The following facts are undisputed unless otherwise indicated.
1 39-6 at 7; ECF No. 41-1 at 6–7.) Plaintiff asserts a windstorm caused the Loss, while Defendant
2 claims the Loss was due to heavy snow and/or record precipitation. (ECF No. 39-6 at 7.) The
3 parties agree the CFP policy, if in place, would have covered the property damage if the Loss was
4 due to a “windstorm.” (Id. at 2.) However, the partie s dispute what qualifies as a “windstorm.”
5 (Id. at 2–3.) Plaintiff contends the CFP policy would cover the Loss if “the cause is wind,
6 whether or not there is precipitation.” (Id.) Defendant disagrees and argues a “windstorm” is
7 only present if there is “little to no precipitation.” (Id.)
8 Around June 2020, Plaintiff told Defendant about the Loss and that the CFP policy was
9 not active at the time of the Loss. (Id. at 8.) In response, Defendant contacted Assurant,
10 Defendant’s exclusive provider of lender-placed policies, to purchase hazard insurance on
11 Plaintiff’s behalf that would retroactively cover the Loss. (Id. at 9, 15.) Defendant purchased a
12 policy through Assurant to adjust Plaintiff’s otherwise uninsured Loss and billed Plaintiff in the
13 amount of $1,206 from her impound account to pay for the policy. (Id. at 9.) The Assurant
14 policy provided coverage for the repair of damage to Plaintiff’s home but did not provide
15 coverage for contents or loss of use. (Id. at 10.) Assurant investigated Plaintiff’s claim and
16 decided to retroactively cover the Loss in the amount of $5,170.33. (ECF No. 41-1 at 12–13.)
17 Following the close of Assurant’s retroactive policy, Plaintiff renewed her CFP policy in
18 October 2020. (ECF No. 41-1 at 12.) Plaintiff’s AAA broker sent the renewed application on
19 Plaintiff’s behalf. (Id. at 13.) However, Plaintiff’s broker did not update the application to reflect
20 Defendant’s new address on the application’s mortgagee clause. (Id.) The new policy therefore
21 lapsed again due to failure to pay. (Id.) Defendant subsequently notified Plaintiff it would
22 purchase hazard insurance on her behalf because the CFP policy expired. (ECF No. 39-6 at 14.)
23 Accordingly, on December 13, 2021, after two prior notices, Defendant sent Plaintiff a notice of
24 force-placed insurance. (ECF No. 44-1 at 14.)
25 On March 8, 2022, Plaintiff filed this action against Defendant alleging: (1) violations of
26 12 U.S.C. § 2605 (“§ 2605”) of the Real Estate Settlement Procedures Act (“RESPA”) and
27 California Financial Code § 50505; (2) breach of fiduciary duty; (3) breach of contract; (4) breach
28 of the covenant of good faith and fair dealing; and (5) negligence. (ECF No. 1.) Plaintiff moved
1 for partial summary judgment on the RESPA and breach of fiduciary duty claims and voluntarily
2 dismissed all remaining claims.2 (ECF Nos. 32, 33.) Defendant opposed Plaintiff’s motion and
3 filed a countermotion for summary judgment. (ECF No. 39.)
4 II. STANDARD OF LAW
5 Summary judgment is appropriate when the moving party demonstrates no genuine issue
6 of any material fact exists and the moving party is entitled to judgment as a matter of law. Fed.
7 R. Civ. P. 56(a); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). Under summary
8 judgment practice, the moving party always bears the initial responsibility of informing the
9 district court of the basis of its motion, and identifying those portions of “the pleadings,
10 depositions, answers to interrogatories, and admissions on file together with affidavits, if any,”
11 which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v.
12 Catrett, 477 U.S. 317, 323 (1986). “[W]here the nonmoving party will bear the burden of proof
13 at trial on a dispositive issue, a summary judgment motion may properly be made in reliance
14 solely on the pleadings, depositions, answers to interrogatories, and admissions on file.” Id. at
15 324 (internal quotation marks omitted). Indeed, summary judgment should be entered against a
16 party who does not make a showing sufficient to establish the existence of an element essential to
17 that party’s case, and on which that party will bear the burden of proof at trial.
18 If the moving party meets its initial responsibility, the burden then shifts to the opposing
19 party to establish that a genuine issue as to any material fact does exist. Matsushita Elec. Indus.
20 Co. v. Zenith Radio Corp., 475 U.S. 574, 585–87 (1986); First Nat’l Bank of Ariz. v. Cities Serv.
21 Co., 391 U.S. 253, 288–89 (1968). In attempting to establish the existence of this factual dispute,
22 the opposing party may not rely upon the denials of its pleadings but is required to tender
23 evidence of specific facts in the form of affidavits, and/or admissible discovery material, in
24 support of its contention that the dispute exists. Fed. R. Civ. P. 56(c). The opposing party must
25 demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the
26
2 The Court does not address the California Financial Code § 50505 claim herein because it
27 is entirely derivative of the RESPA claim and the parties do not raise arguments specific to
§ 50505. See Cal. Fin. Code § 50505 (“Any person who violates any provision of [RESPA]
28 violates this division.”).
1 suit under the governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), and that
2 the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for
3 the nonmoving party. Id. at 251–52.
4 In the endeavor to establish the existence of a factual dispute, the opposing party need not
5 establish a material issue of fact conclusively in its favor. It is sufficient that “the claimed factual
6 dispute be shown to require a jury or judge to resolve the parties’ differing versions of the truth at
7 trial.” First Nat’l Bank of Ariz., 391 U.S. at 288–89. Thus, the “purpose of summary judgment is
8 to ‘pierce the pleadings and to assess the proof in order to see whether there is a genuine need for
9 trial.’” Matsushita Elec. Indus. Co., 475 U.S. at 587 (quoting Rule 56(e) advisory committee’s
10 note on 1963 amendments).
11 In resolving the summary judgment motion, the Court examines the pleadings,
12 depositions, answers to interrogatories, and admissions on file, together with any applicable
13 affidavits. Fed. R. Civ. P. 56(c); SEC v. Seaboard Corp., 677 F.2d 1301, 1305–06 (9th Cir.
14 1982). The evidence of the opposing party is to be believed and all reasonable inferences that
15 may be drawn from the facts pleaded before the court must be drawn in favor of the opposing
16 party. Anderson, 477 U.S. at 255. Nevertheless, inferences are not drawn out of the air, and it is
17 the opposing party’s obligation to produce a factual predicate from which the inference may be
18 drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244–45 (E.D. Cal. 1985), aff’d,
19 810 F.2d 898 (9th Cir. 1987). Finally, to demonstrate a genuine issue that necessitates a jury trial,
20 the opposing party “must do more than simply show that there is some metaphysical doubt as to
21 the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586. “Where the record taken as a
22 whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine
23 issue for trial.’” Id. at 587.
24 ///
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1 III. ANALYSIS
2 Both parties move for summary judgment as to Plaintiff’s remaining claims for: (1)
3 violations of RESPA; and (2) breach of fiduciary duty. (ECF Nos. 32, 39.) The Court interprets
4 Plaintiff’s claims to refer to two distinct lapses of the CFP coverage. The first lapse took place in
5 January 2020, and the second lapse took place in October 2021. (ECF No. 32-1 at 12.) The
6 Court will address the two lapses in turn.
7 A. First Lapse
8 As to the first lapse, Plaintiff’s allegations pertain to two subsections of RESPA, namely
9 § 2605(g) and (k).3 The Court will address these subsections separately.
10 i. 12 U.S.C. § 2605(g)
11 RESPA imposes certain statutory responsibilities on loan servicers regarding borrowers’
12 accounts. See generally 12 U.S.C. § 2605. A mere procedural violation of RESPA is not
13 actionable. Instead, plaintiffs bringing a claim under RESPA must show the statutory violation
14 caused actual injury. 12 U.S.C. § 2605(f) (“Whoever fails to comply with any provision of this
15 section shall be liable to the borrower for . . . (A) any actual damages to the borrower as a result
16 of the failure . . . .”). In other words, actual harm caused by RESPA noncompliance is a required
17 element. Read v. Cenlar FSB, No. EDCV 21-504 JGB, 2021 WL 6618659, at *8 (C.D. Cal. Sept.
18 30, 2021) (citing Moore v. Wells Fargo Bank, N.A., 908 F.3d 1050, 1059 (7th Cir. 2018)). Thus,
19 the Court must determine: (1) whether there is a statutory violation based on Defendant’s failure
20 to comply with RESPA; and (2) whether actual damages resulted from the violation. Id. at *6.
21 a) Statutory Violation
22 Under RESPA, where the terms of a loan require the borrower to make payments into an
23 escrow account for insurance premiums, “the servicer shall make payments from the escrow
24
3 Defendant argues the complaint is “devoid of allegations surrounding 12 U.S.C. §
25
2605(k).” (ECF No. 39-1 at 17.) The Court disagrees. While Plaintiff could have been clearer,
Plaintiff broadly labeled her first claim as “Violations of 12 U.S.C. § 2605.” (ECF No. 1 at 5.)
26
Within the claim, Plaintiff states she was harmed by “imposition of an expensive and inadequate
27 force placed insurance policy . . . .” (Id.) Considering Plaintiff’s allegations about force-placed
insurance, the Court finds Defendant was on sufficient notice that Plaintiff’s claims may
28 implicate § 2605(k).
1 account for such . . . insurance premiums . . . in a timely manner as such payments become due.”
2 12 U.S.C. § 2605(g); Veloz v. Green Tree Servicing LLC, No. CV-13-00915-PHX-DGC, 2014
3 WL 2215866, at *4 (D. Ariz. May 29, 2014).
4 Plaintiff moves for summary judgment for the first lapse because Defendant admits it did
5 not pay the CFP policy’s premium as required by statute. (ECF No. 32-1 at 13.) Defendant
6 maintains it did pay the premium, but simply paid the wrong entity. (ECF No. 39-6 at 6.) Instead
7 of paying CFP directly, Defendant paid Plaintiff’s broker, AAA. (Id.) Defendant also argues
8 Plaintiff and her AAA broker received notices of nonpayment from CFP and did not forward
9 them to Defendant. (Id.) Defendant asserts by failing to bring these notices to Defendant’s
10 attention, Plaintiff breached her obligations under the Deed of Trust. (Id.)
11 Defendant’s arguments are unpersuasive. It is undisputed that Defendant was responsible
12 for paying Plaintiff’s CFP premiums out of the designated escrow account and ultimately failed to
13 do so. (ECF No. 39-6 at 4; ECF No. 41-1 at 2–3.) Defendant fails to cite any authority to support
14 the proposition that paying Plaintiff’s broker relieves it from liability. Defendant also fails to cite
15 any authority explaining how Plaintiff’s purported obligations under the Deed of Trust impact
16 Defendant’s liability under RESPA. Therefore, based on the undisputed fact that Defendant
17 failed to pay the CFP insurance premiums and in the absence of meaningful argument from
18 Defendant on this issue, the Court concludes Defendant violated § 2605(g).
19 b) Actual Damages
20 The parties next dispute the existence of actual damages related to the first lapse. Plaintiff
21 asserts she suffered actual damages because the CFP policy, if in place, would have covered the
22 Loss. (ECF No. 32-1 at 13–14.) Defendant disagrees and asserts Plaintiff suffered no actual
23 harm following Defendant’s failure to pay CFP.4 (ECF No. 39-1 at 15.) Although the parties’
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4 It appears Defendant uses similar reasoning to argue Plaintiff fails to show actual damages
25
under RESPA and Article III standing. (ECF No. 39-1 at 2.) Article III standing and actual
damages under RESPA are usually distinct issues that are addressed separately. Read, 2021 WL
26
6618559, at *3 (quoting In re Capacitors Antitrust Litig., 154 F. Supp. 3d 918, 925 (N.D. Cal.
27 2015)). However, because Defendant’s arguments as to Article III standing and actual damages
overlap in the instant case, the Court will address these arguments together.
28
1 arguments lack clarity, the Court gleans two main arguments from the briefing on this issue: (1)
2 whether Assurant’s payment made Plaintiff whole; and (2) whether the CFP plan would have
3 covered the Loss.
4 First, Defendant argues Assurant’s payment fo r the Loss “made Plaintiff whole.” (Id. at
5 12.) To rebut Defendant’s argument, Plaintiff claims there is “undisputed proof [Plaintiff]
6 suffered uncompensated losses because of [Defendant’s] serial violations of RESPA,5 related
7 California law, and its fiduciary duty.” (ECF No. 41 at 8.) In support, Plaintiff cites to her
8 declaration where she attests she suffered “more than $10,000 to [her] contents6 and more than
9 $75,000 in damage to the home.” (Id. at 6.)
10 Plaintiff’s self-serving declaration ordinarily would be insufficient to create a genuine
11 issue of material fact. F.T.C. v. Publ’g Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir. 1997)
12 (discussing a “conclusory, self-serving affidavit, lacking detailed facts and any supporting
13 evidence, is insufficient” to survive summary judgment). However, additional undisputed facts
14 add weight to Plaintiff’s argument and create a triable issue regarding damages. Specifically,
15 Defendant admits Assurant’s retroactive policy did not afford coverage for contents or loss of use.
16 (ECF No. 39-6 at 10.) Further, Defendant’s Person Most Knowledgeable, Sadaiah Wourman,
17 admitted in her deposition that the CFP policy afforded coverage for contents and loss of use
18 while the Assurant policy did not. (ECF No. 32-4 at 102.) This evidence creates at the very least
19 a reasonable inference that Plaintiff would have recovered more under the CFP policy than she
20 did under the Assurant policy.
21 In addition, Plaintiff alleges she suffered “substantial stress, upset, and financial worry” as
22 a result of the CFP policy lapse. (ECF No. 39-6 at 17.) Without citing any authority, Defendant
23 asserts RESPA does not cover “that type of damage.” (ECF No. 42 at 6.) However, courts have
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5 A plaintiff can recover statutory damages under RESPA if a “pattern or practice of
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noncompliance” is shown. See 12 U.S.C. § 2605(f)(1)(B). Plaintiff does not sufficiently address
whether she is seeking statutory damages for serial violations, and it is not apparent from the
26
Complaint.
27
6 Plaintiff uses the words “contents” and “personal property” interchangeably. (See ECF
28 No. 39-6 at 7–8.)
1 broadly interpreted RESPA’s “actual damages” requirement to include mental distress damages.
2 Veloz, 2014 WL 2215866, at *3 (denying summary judgment because the plaintiff alleged mental
3 distress due to the defendant’s RESPA violation); Craig v. Capital One, N.A., 2018 WL 5857987,
4 at *6 (C.D. Cal. Apr. 10, 2018) (finding emotional dis tress damages recoverable so long as they
5 are causally connected to the RESPA violation). Thus, Plaintiff’s potential mental distress
6 damages as well as Assurant’s limited coverage creates a triable issue as to whether Assurant’s
7 payment alone made Plaintiff whole.
8 Second, the parties dispute whether the CFP policy would have covered the Loss. (ECF
9 No. 39-1 at 13.) Plaintiff contends a windstorm caused the Loss, which would have been covered
10 by the CFP policy. (ECF No. 39-6 at 7.) To support this contention, Plaintiff cites her
11 declaration, in which she states “[i]n March 2020 my home was damaged due to a windstorm.”
12 (ECF No. 32-4 at 67.) Plaintiff also cites to Assurant’s claim payment letter, which expressly
13 states the cause of the Loss was a windstorm.7 (Id. at 31.)
14 In response, Defendant contends heavy snow and/or record precipitation caused the Loss,
15 which would not have been covered by the CFP policy. (ECF No. 39-6 at 7.) In support,
16 Defendant cites a local newspaper article printed on March 18, 2020, that discussed a winter
17 storm that occurred in Plaintiff’s community around the time of the Loss. (See ECF No. 39-3 at
18 168–70.) Defendant argues the Loss was not caused by a windstorm because dictionaries define
19 “windstorm” as “a storm with high winds but little to no rain.” (ECF No. 39-1 at 13.) Defendant
20 also contends Plaintiff herself originally admitted she did not know the cause of the Loss and
21 cannot prove such cause because she has no pictures, logs, or other relevant evidence. (Id. at 14;
22 ECF No. 39-6 at 7.) Lastly, Defendant asserts even if wind contributed to the Loss, it was an
23 indirect cause and thus not covered under the CFP policy. (ECF No. 39-1 at 14.)
24 ///
25
7 Plaintiff further asserts that Defendant adopts this conclusion as Assurant’s principal.
26
(ECF No. 32-1 at 15.) While the parties dispute the nature of Defendant and Assurant’s
27 relationship, Plaintiff maintains Assurant was Defendant’s agent. (ECF No. 41-1 at 9.) Plaintiff
does not cite authority to convince the Court that Defendant should be held to Assurant’s
28 conclusions as a matter of law.
1 Summary judgment is not the appropriate vehicle to resolve this factual dispute.
2 Anderson, 477 U.S. at 250. Moreover, whether a plaintiff’s insurance policy would have covered
3 the damage suffered is a question best left to the jury. Indian Harvest Specialtifoods, Inc. v.
4 Westchester Fire Ins. Co., 2005 WL 1925901, at *7 (E .D. Cal. Aug. 11, 2005) (denying summary
5 judgment because determining whether plaintiff’s loss is covered by an insurance policy is a jury
6 question); Garvey v. State Farm Fire & Cas. Co., 770 P.2d 704, 714 (Cal. 1989) (holding the
7 ultimate question of insurance coverage should be determined by a jury).
8 In sum, although the Court concludes that Defendant violated § 2605(g) by failing to pay
9 the CFP policy premium, there are triable issues as to whether Plaintiff suffered actual damages
10 because of Defendant’s statutory violation. Therefore, the Court DENIES both parties’ motions
11 for summary judgment as to Plaintiff’s § 2605(g) claim for the first lapse.
12 ii. 12 U.S.C. § 2605(k)
13 RESPA also governs the implementation of force-placed hazard insurance. See 12 U.S.C.
14 § 2605(k). Force-placed insurance is hazard insurance coverage obtained by a servicer when the
15 borrower fails to maintain insurance on a property as required by the terms of the loan. 12 U.S.C.
16 § 2605(k)(2). Under RESPA, servicers are prohibited from obtaining force-placed insurance
17 “unless there is a reasonable basis to believe the borrower has failed to comply with the loan
18 contract’s requirements to maintain property insurance.” 12 U.S.C. § 2605(k)(1); Hueso v. Select
19 Portfolio Servicing, Inc., 527 F. Supp. 3d 1210, 1225 (S.D. Cal. 2021).
20 Even if a servicer has no “reasonable basis” for implementing force-placed insurance, a
21 plaintiff must still show actual damages caused by the force-placed policy. Craig, 2018 WL
22 5857987, at *5. If a servicer fails to refund all force-placed insurance premium charges and
23 related fees, courts have found the actual damages requirement satisfied. See Hueso, 527 F.
24 Supp. 3d at 1226; Ikeda v. S.F. Fireman Credit Union, No. 20-cv-08071-TSH, 2021 WL
25 4776705, at *13 (N.D. Cal. Oct. 13, 2021).
26 Thus, like Plaintiff’s § 2605(g) claim, the Court must determine: (1) whether Defendant
27 failed to comply with RESPA; and (2) whether actual damages resulted from the violation.
28 Craig, 2018 WL 5857987, at *5.
1 a) Statutory Violation
2 Plaintiff moves for summary judgment as to § 2605(k) because Defendant wrongfully
3 purchased force-placed insurance on her behalf following the first lapse. (ECF No. 32-1 at 12.)
4 Specifically, Plaintiff argues Defendant used Plaintiff ’s escrow funds to purchase Assurant’s
5 retroactive policy “without any reasonable basis to believe Plaintiff failed to comply with her
6 obligation to maintain property insurance.” (Id.) Plaintiff claims since Defendant was
7 responsible for Plaintiff’s uninsured status due to its violation of § 2605(g), it was not proper for
8 Defendant to buy the force-placed policy. (Id.) In response, Defendant maintains the Deed of
9 Trust permits Plaintiff’s hazard policy to be paid from her escrow account. (ECF No. 42 at 7.)
10 Defendant also asserts Plaintiff agreed to Defendant’s purchase of the Assurant policy to
11 retroactively cover the Loss. (ECF No. 39-1 at 17.)
12 While there is evidence suggesting Plaintiff consented to Defendant purchasing the
13 Assurant policy (see ECF No. 39-3 at 52), neither party provides authority or meaningful
14 argument about how such consent — or the Deed of Trust — impacts Defendant’s liability under
15 RESPA. Further, Defendant provided no evidence showing it had a “reasonable basis” for
16 implementing the force-placed policy as required by statute. A “reasonable basis” exists only if
17 the servicer has sent, by first-class mail, two written notices thirty days apart to the borrower
18 containing reminders that the borrower must carry hazard insurance. 12 U.S.C. § 2605(l)(1).
19 Fifteen days after the second written notice, the servicer can implement a force-placed policy. Id.
20 The parties do not supply any evidence showing Defendant complied with the requisite statutory
21 procedure to establish a “reasonable basis.” See 12 U.S.C. § 2605(l)(1).
22 Therefore, the Court concludes Defendant’s implementation of the Assurant policy after
23 the first lapse failed to comply with § 2605(k).
24 b) Actual Damages
25 Plaintiff maintains the loss of her escrowed funds is enough to satisfy the actual damages
26 requirement. (ECF No. 32-1 at 12.) In response, Defendant contends Plaintiff suffered no
27 pecuniary loss because she was required to have hazard insurance on the property and Assurant’s
28 policy was cheaper than the CFP policy. (ECF No. 42 at 6–7.)
1 Generally, when a plaintiff asserts loss of escrow funds as actual damages, the plaintiff
2 can show the force-placed policy was unnecessarily implemented. See Hueso, 527 F. Supp. 3d at
3 1225 (finding the plaintiff’s § 2605(k) claim actionable because the lender force-placed a policy
4 using plaintiff’s escrow funds even though plaintiff m aintained his own property insurance). In
5 the instant case, it is undisputed Plaintiff did not have insurance when Defendant imposed
6 Assurant’s policy after the first lapse. (ECF No. 39-6 at 9.) Plaintiff fails to cite authority or
7 adequately explain how she was damaged considering Plaintiff needed to maintain hazard
8 insurance and the Assurant policy was less expensive than the CFP policy. (ECF No. 41-1 at 2;
9 ECF No. 39-6 at 9; ECF No. 32-3 at 63.) Based upon the record before the Court, there is no
10 evidence to suggest Plaintiff suffered damages related to this statutory violation.
11 In sum, although the Court concludes Defendant did not comply with § 2605(k) after the
12 first lapse, Plaintiff failed to create a triable issue as to whether she suffered actual damages as a
13 result. Accordingly, the Court GRANTS Defendant’s motion for summary judgment as to
14 Plaintiff’s § 2605(k) claim related to the first lapse.
15 B. Second Lapse
16 Plaintiff renewed the CFP policy in late 2020, and the second lapse occurred in 2021.
17 (ECF No. 39-6 at 12–13.) Like the first lapse, Plaintiff argues Defendant is liable for the second
18 lapse based on violations of § 2605(g) and (k). (ECF No. 32-1 at 12.) However, the only actual
19 damages Plaintiff claims resulted from the second lapse are the loss of escrow funds Defendant
20 used to purchase a force-placed policy. (Id.) In other words, the only actual damages Plaintiff
21 claims for the § 2605(g) violation was the loss caused by the § 2605(k) violation. Therefore, the
22 Court begins by addressing whether Defendant violated § 2605(k).
23 Plaintiff argues Defendant violated § 2605(k) because Defendant had no reasonable basis
24 to believe Plaintiff failed to comply with her obligation to maintain property insurance. (ECF No.
25 32-1 at 12.) Defendant disagrees and argues the force-placed policy was “duly implemented
26 because [Plaintiff] failed to respond to notices to provide proof of hazard insurance.” (ECF No.
27 39-1 at 17.)
28 ///
1 The Court agrees with Defendant that undisputed evidence establishes that Defendant
2 properly implemented the force-placed policy. As an initial matter, it is undisputed that “[o]n
3 December 13, 2021, Rocket Mortgage sent to [Plaintiff] a Notice of Lender-Placed Insurance, and
4 advis[ed] that despite the two prior notices it did not h ave proof of hazard insurance and
5 purchased a plan.” (ECF No. 41-1 at 14.) A closer examination of the evidence reveals
6 Defendant’s notices complied with § 2605(k) and Defendant thus had a “reasonable basis” for
7 implementing the force-placed policy. Specifically, Defendant’s Exhibit J, K, and L reveal
8 Defendant sent Plaintiff two notices on September 27 and November 1, 2021, respectively. (ECF
9 No. 39-3 at 98–105.) Defendant subsequently informed Plaintiff in writing of Defendant’s
10 decision to implement a force-placed policy on December 13, 2021. (Id. at 106–09.) The two
11 notices had “Lender Placed Hazard Reminder Letter” written in large font at the top of the forms,
12 and the December 13, 2021 letter clearly stated “Lender Placed Hazard Policy.” (Id. at 98–109.)
13 The notices indicated Plaintiff’s required insurance had expired and Defendant had no evidence
14 Plaintiff obtained new coverage. (Id.) The letters also clearly laid out how Plaintiff was to
15 inform Defendant if she obtained new coverage, and that Defendant planned to buy insurance for
16 Plaintiff if Plaintiff failed to do so. (Id.) Over thirty days passed between the two notices, and
17 fifteen days elapsed before Defendant implemented the force-placed policy. (Id.)
18 Based upon the record before the Court, Defendant had a “reasonable basis” for
19 purchasing the force-placed policy. The notices provided all relevant information as required by
20 statute. See 12 U.S.C. § 2605(l)(1). Defendant also complied with the statute’s temporal
21 requirements. Id. (stating thirty days must elapse between notices, and fifteen days must elapse
22 thereafter before lender can force-place a policy).
23 Because the Court concludes Defendant complied with § 2605(k)’s statutory
24 requirements, the Court need not and does not consider the question of actual damages for the
25 § 2605(k) violation. This conclusion is also fatal to Plaintiff’s § 2605(g) claim, which hinges on
26 the existence of a § 2605(k) violation. Accordingly, Defendant’s motion for summary judgment
27 is GRANTED as to Plaintiff’s RESPA claims related to the second lapse.
28 ///
1 C. Breach of Fiduciary Duty
2 “To state a claim for breach of fiduciary duty, a plaintiff must show: (1) the existence of a
3 fiduciary relationship; (2) the breach of that relationship; and (3) damage proximately caused by
4 the breach.” Lingad v. Indymac Fed. Bank, 682 F. Su pp. 2d 1142, 1152 (E.D. Cal. 2010) (citing
5 Roberts v. Lomanto, 112 Cal. App. 4th 1553, 1562 (2003)). Generally, “[a]bsent ‘special
6 circumstances,’ a loan transaction ‘is at arms-length and there is no fiduciary relationship
7 between the borrower and lender.’” Swanson v. EMC Mortg. Corp., No. CV F-09-1507 LJO
8 DLB, 2009 WL 3627925, at *5 (E.D. Cal. Oct. 29, 2009) (citations omitted).
9 Despite this general rule, it is undisputed Defendant acted as a fiduciary as it relates to
10 Plaintiff’s escrow account funds. (See ECF No. 39-6 at 2.) Instead, the parties’ arguments
11 pertaining to this claim appear to be entirely derivative of their RESPA arguments. The parties
12 do not discuss nor cite any authority regarding Defendant’s breach of such fiduciary duty.
13 Moreover, the Court has found triable issues as to whether Plaintiff suffered actual damages due
14 to Defendant’s failure to comply with RESPA’s statutory requirements relating to the first lapse.
15 Accordingly, the Court DENIES both parties’ motions for summary judgment as to
16 Plaintiff’s breach of fiduciary duty claim.
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1 IV. CONCLUSION
2 For the foregoing reasons, the Court hereby DENIES Plaintiff's Motion for Summary
3 | Judgment (ECF No. 32) and GRANTS in part and DENIES in part Defendant’s Motion for
4 | Summary Judgment (ECF No. 39) as follows:
5 1. Defendant’s motion is GRANTED as to Plaintiff’s § 2605(g) claim pertaining to the
6 second lapse, and as to the § 2605(k) claims pertaining to both the first and second
7 lapse; and
8 2. Defendant’s motion is DENIED in all other respects.
9 To summarize, Plaintiff's remaining claims are: (1) violation of 12 U.S.C. § 2605(g) as it
10 | pertains to the first lapse; and (2) breach of fiduciary duty as it pertains to the first lapse. The
11 | parties are ORDERED to file a Joint Status Report within thirty (30) days of the electronic filing
12 | date of this Order indicating their readiness to proceed to trial on Plaintiff's claims and proposing
13 | trial dates.
14 IT IS SO ORDERED.
□□ /
15 || Date: February 28, 2024 “ | jf /
16 Mn - Vik
17 Troy L. Nuhlep ]
United States District Judge
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