Force-Placed Insurance Lawsuits
CLASS ACTIONS CONTINUE TO BE FILED FOR FRAUDULENT FORCE-PLACED INSURANCE
Over the past year, state and other governmental agencies have uncovered a long standing fraudulent practice where lending institutions such as Banks and mortgage companies were receiving kickbacks from insurance carriers in order to be awarded force-placed insurance contracts. These insurance policies are placed on a home by the lender when a property owner’s own insurance is cancelled, lapsed or is deemed insufficient and the homeowner fails to secure a replacement policy. Essentially, a lender is permitted to select an insurance carrier and require the homeowner to pay the insurance premiums for a number of different types of insurance on their homes. Force-Placed Insurance can go by many names, including Creditor-Placed insurance, Lender-Placed insurance, Force-Placed Hazard Insurance, Force-Placed Wind Insurance, Force-Placed Flood Insurance and Collateral Protection Insurance.
While the practice of requiring a homeowner to carry homeowner’s or hazard insurance is legal, ongoing investigations have discovered that banks fraudulently received kickbacks or commissions from insurance providers in return for the force-placed contracts, thus creating incentives for banks to select insurance providers that they have a relationship with. The insurance providers in turn charged homeowners a rate that was between two and ten times higher than premiums for voluntary insurance despite the fact that forced placed insurance provides far less protection than voluntary insurance. Additionally, a number of banks created subsidiaries who provided the required coverage, further inflating their profits from fraudulent force-placed insurance practices. These practices have pushed many homeowners into foreclosure or ruined their credit as a consequence of being charged exorbitant amounts for their force-placed insurance.
Homeowners have also complained that it is overly difficult to have the forced placed charges removed even when producing the proper documentation. A complaint filed in Pennsylvania, alleged that a husband and wife took out a home equity line of credit from M&T bank. Soon after obtaining the loan, the couple were notified that they their home was in a Special Flood Hazard Area pursuant to the National Flood Insurance Program maps. There were thus required to carry flood insurance on their home. The couple disagreed that they were included in the Special Flood Hazard Area and produced evidence that definitively establish as much to M&T. Despite this, M&T refused to refund the couple for force-placed flood insurance they had retained.
One Plaintiff, from Florida alleged that he was charged $4,491 annually for his force-placed insurance policy even though he already had proper insurance coverage. The force-placed policy only covered wind and hail and was twice as expensive as his regular, voluntary policy. The policy charges were added the Plaintiff’s monthly mortgage payments which contributed to him going into foreclosure.
While banks and insurance professionals constantly argue that only 1% of their loan portfolios have forced placed insurance and is therefore an inconsequential amount, this 1% equates to approximately 7.56 million citizens according to the Census Bureau. The State of New York recently settled a $25 million lawsuit against forced placed insurance carriers and lending institutions. Additionally, a number of cases have been filed across the country against almost every major bank and forced placed insurance carrier. In California, American Security Insurance Company settled a case for $15 million. In Florida, JP Morgan Chase settled a $300 million case and Wells Fargo settled another case for $19 million. Despite these settlements, many homeowners still have not had their forced place insurance claims adjudicated.
The following banks are known or suspected to be engaged in fraudulent force-placed insurance practice:
JP Morgan Chase (Chase Home Finance, Chase Insurance Agency, Banc One Insurance Company) (SETTLED);
Bank of America (BAC Home Loan Servicing) (Class Action filed; Investigation continues in many other states);
Wells Fargo (Wells Fargo Insurance, Wells Fargo Home Mortgage) (Class Action filed; Investigation continues in many other states);
Citigroup (Citibank, CitiMortgage) (Class Action filed; Investigation continues in many other states);
Financial Freedom Acquisition, LLC (Investigation ongoing);
U.S. Bank (U.S. Bancorp Mortgage) (Class Action Filed; Investigation ongoing in all other states);
HSBC Bank (Class Action Filed; Investigation ongoing in all other states);
Sovereign Bank (Investigation ongoing);
OCWEN Loan Servicing (Investigation ongoing);
Federal National Mortgage Association (Investigation ongoing);
EverBank or Ever Home Mortgage (Investigation ongoing);
Sun Trust Mortgage (Investigation ongoing);
Quicken Loans (Investigation ongoing);
Nationstar Mortgage (Investigation ongoing);
Capital One Financial (Investigation ongoing);
Arvest Bank (Investigation ongoing);
Deutsche Bank (Investigation ongoing);
Ally/GMAC (Investigation ongoing);
PHH Mortgage Corporation (Investigation ongoing);
MidFirst Bank (Investigation ongoing);
Federal National Mortgage Company (Investigation ongoing);
Onewest Bank (Investigation ongoing);
Indymac Bank (Investigation ongoing);
Metlife Bank (Investigation ongoing);
Flagstar (Investigation ongoing);
Fifth Third (Investigation ongoing);
Provident Funding (Investigation ongoing);
Regions Financial (Investigation ongoing);
Nationstar (Investigation ongoing);
PNC Bank/National City Mortgage (Investigation ongoing);
Royal Bank of Canada (Investigation ongoing);
AIG Federal Savings Bank (Investigation ongoing);
Merrill Lynch Credit Corp (Investigation ongoing);
Novastar Mortgage Inc. (Investigation ongoing);
BB&T Corp. (Investigation ongoing);
Sierra Pacific Mortgage (Investigation ongoing);
Guaranty Bank (Investigation ongoing);
TD Bank (Investigation ongoing);
Fidelity Bank (Investigation ongoing);
BNY Mellon (Investigation ongoing);
Netbank (Investigation ongoing);
Saxon Mortgage (Investigation ongoing);
MBNA (Investigation ongoing);
Citizens Bank (Investigation ongoing);
GMAC Mortgage (Investigation ongoing);
Goldman Sachs Group, Inc. (Investigation ongoing);
Litton Loan Servicing LP. Investigation ongoing);
M & T Bank Corporation (Class Action Filed; Investigation ongoing in all other states).
The following insurance companies are known or suspected to have engaged in fraudulent force-placed insurance practice:
Assurant (Voyager Indemnity Insurance, American Security Insurance Company (ASIC) (SETTLED WITH STATE OF NEW YORK; Class Action Filed; Investigation ongoing in all other states);
American Bankers Insurance Company (ABIC) . (Investigation ongoing);
American Bankers Insurance of Florida (Investigation ongoing);
QBE First Insurance Agency (QBE Specialty Insurance Company, QBE North America as part of QBE Insurance Group Limited) (Class Action Filed; Investigation ongoing in all other states);
Balboa Insurance Company (Class Action Filed; Investigation ongoing in all other states);
Breckenridge Insurance (Investigation ongoing);
Zurich Insurance (Investigation ongoing).