7th Circuit Suggests Filed Rate Doctrine May Not Apply to Claims Related to Illinois Property/Casualty Rates
Tuesday, January 7, 2014

The 7th Circuit Court of Appeals recently questioned whether the Filed Rate Doctrine – an exemption doctrine that bars actions challenging the reasonableness of rates charged by entities that a subject to federal or state regulatory approval – applies to property and casualty insurers in Illinois. 

Specifically, in Cohen v. American Security Insurance Co., the 7th Circuit considered whether it was unlawful for a plaintiff’s mortgage lender to purchase allegedly overpriced hazard insurance, at plaintiff’s expense, in the event the insured let its own policy lapse (“forced placed insurance”). At the district court level, the court held that plaintiff’s claims were barred by the Filed Rate Doctrine. On appeal, the 7th Circuit ultimately ruled that plaintiff’s claims failed because “there was no deception at work” by the defendant mortgage lender and insurer, stating that because “maintaining property insurance was [plaintiff’s] contractual obligation and she failed to fulfill it,” and “the consequences of that failure were clearly disclosed to her” then “none of her claims for relief can succeed.”

However, with language that could prove quite significant for all property and casualty insurers operating in Illinois, the 7th Circuit went on to question the lower court’s Filed Rate Doctrine ruling. The Court stated that the Filed Rate Doctrine “protects public utilities and other regulated entities from civil actions attacking their rates if the rates must be filed with the governing regulatory agency and the agency has the authority to set, approve, or disapprove them,” but then noted that although American Security Insurance was required to file its rates with the Illinois Department of Insurance, “it is not at all clear that the Department has the authority to approve or disapprove property insurance rates.” (As the Court further noted, Illinois is the only state that does not expressly authorize its Insurance Department to regulate property insurance rates.)

While the Court’s statements about the application of the Filed Rate Doctrine to Illinois property and casualty rates in Cohen are clearly non-binding dicta, they should serve as a strong reminder to insurers that the regulatory scheme of “open competition” in Illinois with respect to p&c rates may very well come with a corresponding loss of Filed Rate Doctrine protections for challenges to insurer rates that could not be brought elsewhere. 

 

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