Second USAA policyholder lawsuit over fees moves forward
The judge in this case stemming from interest on improper late fees also denied USAA's motion to dismiss.
After the United Services Automobile Association and its subsidiaries agreed to reimburse thousands of policyholders more than $8 million for inappropriately assessed late fees, a federal judge in Maryland is now allowing a separate matter to proceed, in which policyholders seek more than $7 million worth of interest on those improperly retained charges.
U.S. District Judge Peter J. Messitte of the District of Maryland denied USAA’s motion to dismiss plaintiff Walter Black III’s claims for money had and received and unjust enrichment, ruling the plaintiff pleaded facts clearly to suggest USAA “knew full well that they had the use of the late fees,” and “they understood the time-value of the fees” and their interest-bearing potential, according to a June 11 opinion.
Messitte also denied most of USAA’s motion to dismiss regarding its statute of limitations and failure to state a claim argument, and said that the court is prepared to entertain a motion to certify an appropriate class or classes.
Black filed suit against USAA and its subsidiaries, Garrison Property and Casualty Insurance Co., USAA General Indemnity Co., and USAA Casualty Insurance Co., after USAA improperly charged him three $10 late charge fees for untimely payment on his monthly premiums between 2013 and 2014.
USAA lacked authority to charge the late fees because it failed to receive approval from the Maryland Insurance Administration (MIA) and the Maryland Insurance Commissioner (MIC), as is required by state insurance administration regulations, the opinion said.
A 2020 investigation by the MIC resulted in USAA entering into a consent order agreeing to reimburse 130,000 policyholders in excess of $8.1 million for inappropriately charging customers late fees. Black received a credit to his account for $30 for the late charges.
However, he did not receive interest the defendants earned over the years on the charges, leading him to file the current putative class action, seeking the interest on the improperly retained late charges — in excess of $7 million.
Black, represented by attorneys with Timoney Knox in Fort Washington, Pennsylvania, brought claims for money had and received, breach of contract, and unjust enrichment. The defendants moved to dismiss for lack of subject matter jurisdiction, exclusive jurisdiction in the Maryland Insurance Administration (MIA), failure to state a claim, and statute of limitations.
Messitte sided with Black on all but USAA’s breach of contract claims.
Norton Rose Fulbright counsel argued on behalf of the defendants that Black’s claims for money had and received and unjust enrichment were subsumed in his breach of contract claim, and that he has no breach of contract claim. They claimed that Black failed to plead facts they “knew of or appreciated any benefit allegedly conferred [on] plaintiff” and that it would be “inequitable” for them not to pay interest on disputed late fees, the opinion said.
“This argument cannot be taken seriously. The pleaded facts clearly suggest that defendants knew full well that they had the use of the late fees, and that most certainly they understood the time-value of the fees, which is to say the interest-bearing potential of the fees. Beyond that, defendants have pointed to no reason equitable or otherwise, why they should still be able to keep the fruits of the improperly retained fees.”
In regard to Black’s lack of subject matter jurisdiction argument, USAA claimed he failed to exhaust his administrative remedies, arguing that only the MIA can decide the issue of whether interest on unapproved late charges should be assessed, not the courts.
However, the court determined that Black already exhausted his administrative remedies with the MIA and that the MIA doesn’t have exclusive jurisdiction over the issue of interest on the late charges. According to the court, there is ”absolutely no indication that the Maryland Legislature ever intended the MIA to have exclusive jurisdiction over the specific issue of entitlement to interest on late charges improperly retained, even if they were retained in good faith and without fraud or malice.”
The court also rejected USAA’s argument that Black’s claim was time-barred in which they cite Maryland’s three-year statute of limitations, running from the time that the cause or action accrued. The defendants argued Black’s claims accrued in 2013 and 2014 when the late charges were assessed, while Black argued his claims accrued in March 2020 when the defendants refunded the fees but not the interest earned on the money they retained.
Black further suggested that even if his claim began when he was improperly charged, action on the claims was tolled because of the discovery rule, which provides “that a cause of action accrues only when a plaintiff in fact knows or reasonably should know of the wrong.”
The court agreed with this analysis, concluding that “until defendants acted to refund the improperly assessed late charges in 2020, no policyholders would reasonably have known they had a cause of action for restitution of the late fees, much less a cause of action for restitution of the interest earned on the fees,” the opinion said.
“Defendants themselves — if they are to be believe — did not realize until 2019 or 2020 that assessment of the late fees was improper and, if they did know, they certainly did not seem to have shared their enlightenment with any policyholder, Black included,” Messitte said. “There is no reason to hold Black or other policyholders to a stricter standard of discovery than defendants hold themselves to.”
However, Messitte concluded Black’s claims for money had and received and for unjust enrichment were quasi-contract in nature, and therefore, already covered the case. The judge agreed to dismiss that sole count.
Black’s attorney, Keith T. Vernon of Timoney Knox, in Fort Washington, Pennsylvania, and the defendants’ attorney, Adam T. Schramek, a partner at Norton Rose Fulbright, in Austin, Texas, did not immediately respond to requests for comment.
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