Force Placed Insurance Charges Allow Special Defense to Foreclosure
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Post 4802
In an action to foreclose a mortgage the trial court granted in part the plaintiff’s motion to strike the defendant’s special defenses and counterclaim; subsequently, the court, Cirello, J., granted the plaintiff’s motion for summary judgment as to liability only; thereafter, the court, Spader, J., rendered judgment of foreclosure by sale, and the defendant appealed.
In M&T Bank v. Robert R. Lewis, No. SC 20817, Supreme Court of Connecticut (April 30, 2024) the appeal of a foreclosure judgment presented one question important to insurance professionals: Whether allegations of impropriety in a mortgagee’s force placement of property insurance arise from the making, validity or enforcement of the mortgage for purposes of a special defense to a foreclosure action.
FACTS
Robert R. Lewis claimed that the trial court improperly granted the plaintiff’s motion to strike two of the defendant’s special defenses arising from the plaintiff’s conduct in its force placement of flood insurance on the property at issue, alleging that the plaintiff had unclean hands and breached the implied covenant of good faith and fair dealing on the ground that those defenses do not arise from the making, validity or enforcement of the mortgage.
After the defendant failed to make his monthly payment on August 1, 2017, the plaintiff notified him in writing of his default. The plaintiff subsequently elected to accelerate the note and foreclose on the mortgage. The parties participated in the state’s court-supervised foreclosure mediation program but were unable to reach an agreement to modify the loan.
The trial court granted the plaintiff’s motion for summary judgment as to liability only.
DISCUSSION
Defendant’s claim that the trial court improperly granted in part the plaintiff’s motion to strike the defendant’s special defenses of unclean hands and breach of the implied covenant of good faith and fair dealing predicated on the plaintiff’s improprieties in the force placement of the flood insurance, do not ”arise from the making, validity or enforcement” of the mortgage.
In the present case, the trial court struck the special defenses of unclean hands and breach of the implied covenant of good faith and fair dealing on the ground that the defendant’s allegations did not relate to ”the specific mortgage at issue in this case.” (Emphasis added.)
The question remains whether those allegations are sufficiently related to the making, validity or enforcement of the mortgage. The Supreme Court concluded that they are. The defendant alleges, the plaintiff charged the defendant an amount greater than the ”cost” of the insurance, in violation of section 5 of the mortgage agreement, concealed a ”kickback” agreement that it had with ASIC. All of this alleged conduct is directly related to the plaintiff’s reliance on and enforcement of section 5 of the mortgage agreement.
The Supreme Court noted that the alleged effect of the plaintiff’s conduct in enforcing section 5 of the mortgage agreement-that it wrongfully increased the defendant’s overall debt-provides a sufficient nexus to the foreclosure action. Defendant’s allegations in support of the special defenses are sufficiently connected to the enforcement of the mortgage.
Since an action to foreclose a mortgage is an equitable proceeding it is a fundamental principle of equity jurisprudence that for a plaintiff to show that he is entitled to the benefit of equity he must establish that he comes into court with clean hands. The clean hands doctrine is applied not for the protection of the parties but for the protection of the court. It is applied not by way of punishment but on the basis of considerations that make for the advancement of right and justice. A mortgagor who has defaulted on a mortgage is not precluded from asserting the special defense of unclean hands. Therefore, the Supreme Court took the Defendants allegations as true it concluded that the defendant alleged willful conduct that is not equitable, fair or honest.
The defendant sufficiently pleaded that the plaintiff’s alleged misrepresentations interfered with his right to receive the benefits of the agreement. This Defendant did by alleging that the plaintiff’s kickback scheme wrongfully resulted in the defendant’s payment of more than he was obligated to pay and more than the plaintiff was entitled to charge him, pursuant to the mortgage agreement.
By alleging that Plaintiff’s conduct with force placed insurance increased his overall debt the trial court improperly struck the special defenses.
ZALMA OPINION
Insurance is important to every mortgagee needing it to protect the security for the loan. Mortgages require insureds to obtain insurance and allow, if they fail, to obtain force placed insurance that only protects the mortgagee at the expense of the insured. However, the mortgagee should never charge the insured more than it pays since that would be fraudulent and, as in this case, a defense to the foreclosure.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Concurrent Cause Doctrine Does Not Apply When all Causes are Excluded
Post 5119
Death by Drug Overdose is Excluded
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Southern Insurance Company Of Virginia v. Justin D. Mitchell, et al., No. 3:24-cv-00198, United States District Court, M.D. Tennessee, Nashville Division (October 10, 2024) Southern Insurance Company of Virginia sought a declaratory judgment regarding its duty to defend William Mitchell in a wrongful death case pending in California state court.
KEY POINTS
1. Motion for Judgment on the Pleadings: The Plaintiff moved for judgment on the pleadings, which was granted in part and denied in part.
2. Duty to Defend: The court found that the Plaintiff has no duty to defend William Mitchell in the California case due to a specific exclusion in the insurance policy.
3. Duty to Indemnify: The court could not determine at this stage whether the Plaintiff had a duty to ...
GEICO Sued Fraudulent Health Care Providers Under RICO and Settled with the Defendants Who Failed to Pay Settlement
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Post 5119
Default of Settlement Agreement Reduced to Judgment
In Government Employees Insurance Company, Geico Indemnity Company, Geico General Insurance Company, and Geico Casualty Company v. Dominic Emeka Onyema, M.D., DEO Medical Services, P.C., and Healthwise Medical Associates, P.C., No. 24-CV-5287 (PKC) (JAM), United States District Court, E.D. New York (July 9, 2025)
Plaintiffs Government Employees Insurance Company and other GEICO companies (“GEICO”) sued Defendants Dominic Emeka Onyema, M.D. (“Onyema”), et al (collectively, “Defendants”) alleging breach of a settlement agreement entered into by the parties to resolve a previous, fraud-related lawsuit (the “Settlement Agreement”). GEICO moved the court for default judgment against ...
ZIFL – Volume 29, Issue 14
Post 5118
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You can read the full 20 page issue of the July 15, 2025 issue at https://lnkd.in/giaSdH29
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
This issue contains the following articles about insurance fraud:
The Historical Basis of Punitive Damages
It is axiomatic that when a claim is denied for fraud that the fraudster will sue for breach of contract and the tort of bad faith and seek punitive damages.
The award of punitive-type damages was common in early legal systems and was mentioned in religious law as early as the Book of Exodus. Punitive-type damages were provided for in Babylonian law nearly 4000 years ago in the Code of Hammurabi.
You can read this article and the full 20 page issue of the July 15, 2025 issue at https://zalma.com/blog/wp-content/uploads/2025/07/ZIFL-07-15-2025.pdf
Insurer Refuses to Submit to No Fault Insurance Fraud
...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
