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2 février, 2008 14:54

Shannon P. Duffy

The Legal Intelligencer

02-04-2008

A federal judge has certified a consumer class action suit against Commonwealth Land Title Insurance Co., brought by homeowners who claim they were overcharged for title insurance when they refinanced, because they were never told that they qualified for a discounted premium.

The ruling by U.S. District Judge Eduardo C. Robreno in Alberton v. Commonwealth Land Title Insurance Co. joins a growing list of courts that have certified similar class actions in Florida, Maryland, Minnesota, New York and Ohio.

At issue in all of the cases are claims by the homeowners that their entitlement to a statutorily discounted premium should have been detected by the insurer during its title search.

Under Pennsylvania law, title insurance rates are governed by a statute that calls for a 10 percent "reissue rate" discount whenever a property owner purchases title insurance within 10 years of obtaining a policy issued on the same property and a 20 percent "refinance rate" discount if the property owner applies for title insurance within three years of obtaining a previous policy.

The plaintiffs lawyers, led by attorney Steven A. Schwartz of Chimicles & Tikellis in Haverford, Pa., argue that property owners are entitled to the discounted rates whenever the title search, which the insurer is required by law to conduct, reveals events in the chain of title that "would lead any reasonable title agent to conclude that a prior title policy was issued."

Joining Schwartz on the plaintiff team are attorneys Joseph G. Sauder and Timothy N. Mathews of Chimicles & Tikellis; Donald L. Perelman and Paul Costa of Fine Kaplan & Black; Joseph Goldberg of Freedman Boyd Daniels Hollander & Goldberg in Albuquerque, N.M.; and Christopher G. Hayes of West Chester, Pa.

The suit alleges that anytime Commonwealth Land Title's agents discovered in the title search that an insurance purchaser had refinanced the property within the past three or 10 years, they should have known that a prior insurance policy had been issued and that the discounts should have been automatically applied.

But defense attorneys Samuel W. Braver and Stanley J. Parker of Buchanan Ingersoll & Rooney's Pittsburgh office argued that the law imposes no such duty.

Instead, they argued, the law requires the insurance purchaser to provide evidence of the prior insurance policy rather than relying on the insurer to uncover the policy in its title search.

Contrary to plaintiffs' allegations, Braver and Parker argued that it is possible to obtain a mortgage or refinancing without title insurance in a variety of circumstances and that it is therefore impossible to conclude that every member of the proposed class who purchased title insurance from Commonwealth within three or 10 years of obtaining a mortgage or refinancing was eligible for a reduced premium.

The plaintiffs brought nine claims -- breach of express contract, breach of implied contract, money had and received, violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, fraudulent misrepresentation, negligent misrepresentation, negligent supervision, accounting and unjust enrichment.

(A claim for "money had and received" is a common law action by which a plaintiff seeks to recover money paid to the defendant that would otherwise be unrecoverable because it had been paid by mistake or under compulsion, or the consideration was insufficient.)

Robreno found that the suit satisfies the numerosity requirement because the plaintiffs estimate that the class includes tens or even hundreds of thousands of individuals and that Commonwealth Land Title has estimated that it issued an average of 40,000 policies per year in Pennsylvania.

The class also satisfies the commonality requirement, Robreno found, because all of the class members share the factual question of whether a past mortgage necessarily meant a past purchase of title insurance.

The lead plaintiff is also typical of the class, Robreno found, because his claims arise from the "identical practice" of charging a nondiscounted rate unless the purchaser presented evidence of previous title insurance and regardless of whether the title search revealed a prior mortgage or refinancing.

Robreno also rejected the argument that the lead plaintiff cannot be considered typical because he purchased his title insurance from an agent and not from Commonwealth Land Title directly.

"Whether or not Commonwealth is responsible for the actions of its agents is itself a question raised by the claims of many class members," Robreno found, noting that by asserting a claim of negligent supervision, the plaintiffs had imputed responsibility for the agents' actions to the insurer.

But Robreno agreed that the lead plaintiff could not represent the entire class because the statutory language for the reissue discount and the refinance discount are markedly different.

For the refinance discount, the statute says the rate "shall be" the discounted rate, while the reissue rate applies "when evidence of the prior policy is produced."

As a result, Robreno found that Commonwealth Land Title could be found to have violated the first section but not the second.

Nonetheless, Robreno found that the conflict did not defeat typicality and that the proper cure was to establish two subclasses, conditioned on the plaintiffs adding a representative for the reissue discount class.

Robreno also found that all of the plaintiffs' claims were amenable to class treatment.

The claims for unjust enrichment and money had and received could be handled on a classwide basis, Robreno found, because neither requires inquiry into the individual circumstances of a transaction.

Although Pennsylvania's consumer protection law at one time required plaintiffs to prove all the elements of common law fraud, Robreno found that a 1996 amendment made to the law made it "less restrictive" and plaintiffs must now show only conduct that is "deceptive to the ordinary consumer."

"Individualized proof of justifiable reliance is no longer required to succeed on a claim under the UTPCPL. Instead, a policy of not applying published insurance rates, if proven, would satisfy the requirement of a deceptive practice under the UTPCPL," Robreno wrote.

Likewise, Robreno found that the misrepresentation claims may also be amenable to class treatment because individualized proof of reliance is excused for such claims where the defendant has a fiduciary relationship with the plaintiffs.

The plaintiffs lawyers had argued that the relationship between the insurer and the class members excuses the need for individualized proof of reliance.

Robreno tentatively agreed but cautioned that if it were later determined that proving a special relationship would require an examination of each purchaser's relationship with Commonwealth Land Title or that no such special relationship existed, "individualized proof of reliance will be required and the class will be de-certified as to the fraudulent and negligent misrepresentation claims."

Finally, Robreno rejected the defense argument that a class action would be unmanageable because an individual review of each file would be necessary to determine whether an insurance purchaser is even a class member and also to compute individual damages awards.

"While it may be true that each file must be reviewed individually, under plaintiff's theory, this will be a virtually automatic process that looks only at whether the title search showed a prior mortgage or refinancing and whether the customer received a discounted rate," Robreno wrote.

Braver could not be reached for comment on the ruling.