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Richardson v. Standard Guaranty Insurance Company

371 N.J. Super. 449, 853 A.2d 955 (App. Div. 2004)

INSURANCE; FILES RATES—The filed rate doctrine means that every insurance buyer, even one of credit card insurance, is deemed to know the rates filed with the Department of Insurance and a consumer cannot enforce a rate that differs from the one that was filed.

A customer filed a class action suit against a credit card company and its insurers, claiming that the company’s sales practices fraudulently induced her into purchasing credit interruption of income policies, combined credit life and credit disability insurance policies, and a credit family leave insurance policy. Her complaint alleged violations of the Consumer Fraud Act (CFA), common-law fraud, fraudulent concealment, negligence, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty. The credit card company moved to dismiss, asserting that the claims were barred by the filed rate doctrine. The lower court agreed and dismissed the claims.

The filed rate doctrine is based on the understanding that a regulated entity is forbidden from charging rates for its services other than those properly filed with the appropriate regulatory authority. The doctrine bars claims for monetary relief where the damage claims are premised on state contract principles, consumer fraud or other bases by which plaintiffs seek to enforce a rate other than the filed rate. Furthermore, claims against regulated entities may be limited or dismissed by the fact that consumers are presumed to have constructive knowledge of the filed rates.

On appeal, the Appellate Division held that the filed rate doctrine applied to the insurance industry because courts are not suited to regulate insurance rates, and because the industry is extensively regulated. However, the Court held that this did not mean that all claims against a highly regulated entity are barred. Rather, a court must decide if there is a real possibility of conflict if the CFA were to apply to a particular practice. For example, the doctrine applies if the relief sought in a CFA claim would necessarily lead to a judgment that would collaterally alter the rates contained in an insurer’s filings with the Department of Banking and Insurance (DOBI).

On appeal, the card holder claimed she was fraudulently induced into purchasing the policies; that the costs and benefits of the policies were misrepresented; and that the insurers breached the terms of the policies. The Appellate Division held that the lower court properly dismissed these claims for two reasons. First, the fraudulent inducement claim was properly barred by the filed rate doctrine because of the presumption that consumers know the filed insurance rate. Second, the misrepresentation claim was barred, not only because the doctrine presumed the customer’s knowledge of the costs and benefits contained in the filed rates, but also because the doctrine requires a court to conclude that the customer had suffered no ascertainable loss because of the presumed knowledge. One cannot recover monetary damages if the rate paid is the same as in the approved filed tariff. Thus, the Court held that if it found damages under the CFA, it would be the equivalent of applying a rate different from the filed rate. For that reason, the claims based on what the card holder paid were properly dismissed against the insurance companies.

On the other hand, an alleged “breach of terms” claim under the CFA would not be barred by the filed rate doctrine because a consumer is allowed to sue for damages on a claim that an insurer has breached a policy as written. Although the doctrine precludes a claim for damages if it would indirectly cause the application of rates different from the filed rates, one can sue if he has been deprived of benefits that were promised, but not delivered. Nonetheless, the Court still dismissed the card holder’s claims because breach of an enforceable contract does not constitute a violation of the CFA.

The Appellate Division refused to apply the filed rate doctrine to dismiss the card holder’s complaints about the family leave insurance policy or the credit interruption policies because the insurance companies failed to prove that there were filed rates for these policies. According to the Court, it would have been illogical to apply the doctrine to a contract that was not based on a filed rate.

Lastly, the Court held that none of the claims against the credit card company should have been dismissed because there is a distinction between retailers who are agents of the regulated entity and those who act independently. Although the Court was concerned about circumventing the filed rate doctrine when the goods or services are sold by a non-regulated entity that has an agency relationship with a regulated entity, it held that there was no such concern when a nonregulated retailer acts independently from the regulated entity. Therefore, the Court remanded these claims to the lower court to determine the relationship between the credit card company and the insurers.


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