.... Continued. This is the concluding post of an article which began on Insurance Claims and Bad Faith Law Blog on March 5, 2013.
In contrast, this defense is regularly argued in other cases which also contain express contracts. Courts have found that this argument may be an obstacle but it is not an insurmountable obstacle for most Courts in most cases.
Most Courts still hold even where an express contract is present that breach of the implied covenant can be alleged in these force-placed insurance cases. They require however that the lender's alleged scheme (and these cases almost certainly will present allegations of a lender's scheme) (1) "contravenes" the purpose of a provision in the parties' express contract and (2) obstructs the borrower's "reasonable expectations" of how that lender would act in exercising the authority conferred by the express provision to force the placement of insurance. Montanez v. HSBC Mortgage Corp., 2012 WL 2899371 *7 (E.D. Pa. July 17, 2012).
When such allegations are pled, most Courts hold that such allegations state a claim of breach of the implied covenant upon which relief can be granted. E.g., Cannon v. Wells Fargo Bank, N.A., 2013 WL 764964 *12 (D.D.C. March 1, 2013); Williams v. Wells Fargo Bank N.A., 2011 WL 4901346 *4 (S.D. Fla. October 14, 2011); Abels v. JPMorgan Chase Bank, N.A., 678 F. Supp. 2d 1273, 1278-79 (S.D. Fla. 2009); see, e.g., Lass v. Bank of America, N.A., 695 F.3d 129, 138 (1st Cir. 2012)(Massachusetts law); Kolbe v. BAC Home Loans Servicing, LP, 695 F.3d 111, 123 (1st Cir. 2012)(New Jersey law).
Further, in many force-placed insurance cases, borrowers-plaintiffs allege breach of implied covenant claims as breach of contract claims, or the Courts in force-placed insurance cases treat these claims as breach of contract claims. Rule 12(b)(6) motions to dismiss implied covenant claims are regularly denied whenever a motion to dismiss a breach of contract claim would be denied under that Federal Rule. E.g., Ellsworth v. U.S. Bank, N.A., 2012 WL 6176905 * 15, *18 (N.D. Cal. December 11, 2012)(Beeler, USMJ); McNeary-Calloway v. JP Morgan Chase Bank, N.A., 863 F. Supp. 2d 928, 954-55 (N.D. Cal. 2012)(Spero, USMJ, exercising jurisdiction by consent; holding under both California and New Jersey law that the separate plaintiffs simultaneously alleged sufficient claims both for breach of contract and for breach of the implied covenant of good faith and fair dealing); Webb v. Chase Manhattan Mort. Corp., 2008 WL 2230696 *16 n.8 (S.D. Ohio May 28, 2008)("Under Ohio law, there is no tort cause of action for breach of the covenant of good faith that is separate from a breach of contract claim. Therefore, if a breach of duty of good faith and fair dealing is asserted as part of a contract claim, it must be alleged as part of that contract count; it cannot stand alone.").
These posts are adapted for Insurance Claims and Bad Faith Law Blog and Insurance Claims and Issues Weblog from a forthcoming article in Insurance Litigation Reporter.
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