Miami, FLFollowing increased media coverage regarding force-placed insurance and recent force-placed insurance lawsuits and settlements, regulators in Florida have taken action to protect homeowners in the state from allegedly predatory practices. Two companies that offer force-placed insurance, also called lender-placed insurance, will have to comply with the state’s demands, while some companies involved in force-placed insurance are settling lawsuits filed against.
Force-placed insurance is insurance placed on a home by a bank or lender when borrowers do not have the coverage - or proof of coverage - that their mortgage requires. The insurance provider is usually chosen by the bank or lender. As a result, the premiums are often much higher than commercially available premiums. Furthermore, plaintiffs in force-placed insurance lawsuits allege that the financial institutions involved receive commissions for using certain companies for insurance, place insurance coverage far greater than the amount the financial institution needs to protect its interest in the property and sometimes apply the insurance retroactively.
Lawsuits against force-placed insurance providers and mortgage lenders allege homeowners often receive much less coverage with the insurance, but at much higher rates.
Bank of America and QBE recently agreed to pay $228 million to settle a class-action lawsuit regarding force-placed insurance, although Bank of America denied wrongdoing. In March, JPMorgan Chase and Assurant Inc., had their $300 million force-placed insurance settlement approved by a judge.
Bank of America also reportedly agreed to pay $31 million in a separate lawsuit involving force-placed insurance. In that case, the bank allegedly sent letters to borrowers informing them that they lived in flood-hazard areas and needed more flood insurance, even though homeowners in those areas were not required by federal law to have extra insurance. Furthermore, the lawsuit alleged, plaintiffs who sent in proof their insurance covered the extra-coverage requirement had that proof ignored. According to court documents, the lawsuit alleged Bank of America force-placed insurance on the plaintiffs and received “kickbacks, referral fees, commissions or other compensation on the transactions, thereby realizing unlawful financial gains,” for doing so.
Bank of America did not admit to any wrongdoing in agreeing to the settlement.
According to the Herald-Tribune (4/21/14), Praetorian Insurance Co and American Security Insurance Co have been told to change their force-placed insurance practices. Both companies were reportedly told to lower their rates, and Praetorian was also reportedly told to stop paying commissions to mortgage servicers, stop paying incentives to mortgage servicers and notify customers about their force-placed insurance options.
If you or a loved one have suffered losses in this case, please click the link below and your complaint will be sent to a financial lawyer who may evaluate your Force-Place Insurance claim at no cost or obligation.