The Docket: Pennsylvania S.C. Rules on Class-Action Regarding Rates

October 26, 2010

The Docket is a monthly TitleNews Online feature provided by ALTA’s Title Counsel Committee that reviews significant court rulings and other legal developments, and explains the relevance to the title insurance industry.

Today’s review of a California lawsuit discussing closing instructions was provided by Adam Enis, with Pittsburgh-based the law firm Jackson Kelly PLLC. Enis can be reached at

CITATION: White v. Conestaga Title Ins. Co., 982 A.2d 997 (Pa. Super. 2009), appeal granted, 994 A.2d 1083 (Pa. May 19, 2010)

FACTS: This is one of a series of Pennsylvania class actions in which homeowners allege that they were overcharged for title insurance on residential refinances. Plaintiff purchased title insurance from Conestaga in connection with a 2005 refinance. She alleged that Conestaga, through its agent, overcharged her by offering the basic rather than the refinance rate. Conestoga’s manual provided for three approved rates: (1) the basic rate, a default rate applied if either of the other two rates do not apply, (2) a reissue rate (90 percent of the basic rate), and a refinance rate (80 percent of the reissue, or 72 percent of the basic). Under Conestoga’s manual, the refinance rate is to be charged when the property is refinanced within three years and there has been no change in fee simple ownership. At the closing, plaintiff was offered the basic rate rather than the refinance rate.

Conestaga admitted these allegations, but argued that the statutory language does not obligate it to charge the discounted rate unless the homeowner produces a copy of the prior title insurance policy at closing. However, the Conestaga manual does not contain “when evidence of the earlier policy is produced” language. Plaintiff argues that it is the defendant’s duty to offer the homeowner a refinance rate if it discovers an institutional mortgage in the chain of title within three years (or the reissue rate if it discovers such a mortgage within 10 years).

After discovering the alleged overcharge, plaintiff did not request reimbursement from Conestoga, nor did she seek review of the title insurance company’s actions by the Insurance Commissioner. Instead, she filed a purported class action lawsuit asserting claims for money had and received, unjust enrichment, and violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, 73 PA.STAT. § 201-1 et. seq. In opposing a motion for class certification, Conestoga argued that the court lacked jurisdiction because plaintiff was required to exhaust the statutory remedies set forth under the Title Insurance Companies Act (TICA), 40 Pa.Stat. § 910-44(b), prior to instituting a private cause of action. The TICA provides for a process whereby “any person aggrieved by the application of its rating system may be heard.” Section 910-44(b). The Court of Common Pleas of Philadelphia County agreed and dismissed plaintiff’s complaint for failure to exhaust the administrative remedy provided in TICA.

HOLDING: On appeal, the Superior Court reversed. The court held that the TICA is inapplicable and that the true issue is application of the consumer protection laws to allegations of deceptive business practices and pervasive overcharges. It observed that plaintiff is not merely claiming that Conestoga failed to apply the proper rate, but that Conestoga “did not apply the rate structure at all and merely imposed the highest rate on unsuspecting consumers without any discretion or deference to the rate structures approved by the Commissioner.” Id. at 1004.

The court held that Pennsylvania’s consumer protection law is not inconsistent with TICA; and that neither the TICA nor the Unfair Insurance Practices Act, 40 P.S. § 1171.1, et. seq., was intended to provide an exclusive administrative remedy. In reaching its decision, the court gave great weight to an amicus curiae opinion of the Insurance Commissioner holding that the TICA does not provide an exclusive remedy that must be exhausted before seeking a private action. On May 19, 2010, the Supreme Court of Pennsylvania granted a petition for allowance of appeal. A decision is pending.

RELEVANCE TO THE TITLE INDUSTRY: Several similar cases filed in the United States District Court for the Eastern District of Pennsylvania have been stayed pending decision of the Pennsylvania Supreme Court in White v. Conestaga. See Levine v. First American Title Ins. Co., 2010 WL 2527681 (E.G. 2010); Coleman v Commonwealth Land Title Ins. Co., 2010 WL 2545539 (E.G. 2010); and Schwartz v. Lawyers Title Ins. Co., 2010 WL 2527682. Each of these actions involves claims under the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c)(RICO) as well as Pennsylvania’s unfair trade practices law. Defendants in these cases argue that applying federal RICO law would interfere with the exclusive administrative remedy provided in TICA. Thus, the Pennsylvania Supreme Court’s decision in White v. Conestoga is relevant to both important class action litigation facing industry participants as well as pricing practices going forward.

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