BAD FAITH PLAINTIFF ALLEGED FACTS SUFFICIENT TO WITHSTAND MOTION TO DISMISS IN THIS MORTGAGE INSURANCE CASE (Philadelphia Federal)

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This case involved mortgage insurance. The insured alleged breach of contract, conversion, unjust enrichment, and bad faith. The insurer moved to dismiss on a number of grounds. The court refused to dismiss the bad faith count.

Plaintiff alleged bad faith on the basis that the insurer “denied, rescinded, and curtailed coverage for valid claims and refused to reimburse [the insured] for premium overpayments.” The court found the Complaint “replete with allegations arguing that [the insurer] lacked a reasonable basis for its coverage decisions.” Moreover, the insured alleged the insurer “knew and understood that if it wrongfully rescinded, denied and/or curtailed claims that third parties would seek to have [the insured] repurchase these loans.” Thus, both elements of a bad faith claim were satisfied.

The court found the following factual allegations, among others, sufficient to make out a plausible claim under Rule 8 and Twombly/Iqbal: Curtailing benefits through implementing post-hoc servicing guidelines and standards; misinterpreting policy language to deny claims improperly based on lateness and missing documents; rescinding claims based on “post-hoc re-underwriting” loans it had previously agreed to insure; and refusing to return premium overpayments. Further, the plaintiff actually listed over 5,000 specific loans at issue in its complaint.

These allegations could not be treated as conclusory, and the motion to dismiss the bad faith claim was denied.

Date of Decision: March 22, 2019

Nationstar Mortgage LLC v. Radian Guaranty, Inc., U. S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-03798, 2019 U.S. Dist. LEXIS 48164, 2019 WL 1318541 (E.D. Pa. Mar. 22, 2019) (Pappert, J.)

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