Settlements Reached in Force-Placed Insurance Lawsuits

February 20, 2014, 10:30AM. By Heidi Turner

Miami, FLSettlements have reportedly been reached in a variety of force-placed insurance lawsuits, filed against financial firms such as HSBC and Bank of America Corp. Force-placed insurance lawsuits alleged that the firms had deals with insurance companies that resulted in overcharging the borrower for insurance.

According to Bloomberg (2/14/14), both Bank of America Corp and HSBC Holdings Plc agreed to settle lawsuits filed by homeowners who alleged they were overcharged for their force-placed insurance. Included in the excess costs charged to homeowners were reportedly fees and commissions paid to the bank. The settlement is currently confidential, with both sides still required to sign the formal agreement.

Meanwhile, Reuters (2/6/14) reports that Citigroup has also agreed to settle lawsuits filed against it regarding force-placed insurance. The lawsuit, which reportedly involves thousands of homeowners, will be settled for $110 million and will see class members receive 12.5 percent of the premium when they submit their claim. In addition, Citi will also agree to not accept commissions for force-placed insurance for six years from the date of the settlement.

Force-placed insurance is insurance that is put on a property if the homeowner cannot provide proof of valid insurance on the property. The idea is that it covers the bank or mortgage lender’s interest in the property, but because it is placed by the lender, the homeowner often has no say in which company provides the insurance, resulting in an increased insurance rate. Furthermore, although force-placed insurance tends to be much more expensive than commercially available insurance, with premiums up to 10 times higher according to some lawsuits, the insurance often comes with much less protection.

In September 2013, a force-placed insurance lawsuit filed against JPMorgan Chase & Co and Assurant was reportedly settled for $300 million. That lawsuit alleged two insurance companies control force-placed insurance market and offer mortgage lenders and servicers kickbacks for entering a relationship with them. Those kickbacks are allegedly charged to the borrower, and in some cases the insurance is backdated to times when no claims were made and provides coverage in excess of the risk to the lender. The settlement reportedly also requires JPMorgan to no longer accept fees for force-placing insurance.

The Bank of America case is Hall v. Bank of America N.A., 1:12-cv-22700, while the HSBC case is Lopez v. HSBC Bank USA N.A., 13-cv-21104. The Citi lawsuit is Gordon Casey, Duane Skinner and Celeste Coonan, individually and on behalf of all others similarly situated vs Citigroup Inc., Case No. 12-00820, U.S. District Court, Northern District of New York.