Force Placed Insurance Terms More Fact Than Allegation

Toronto, ON: Many a Lender insurance lawsuit has been fought on the premise that not only is Force-Place Insurance sometimes foisted upon an unsuspecting homeowner unnecessarily, but the quality of the product is inferior to standard policies, at increased rates.

This fact is even outlined by the Royal Bank of Canada (RBC), in an online information page directed to Canadian clients who also own property in the United States, such as a winter home. RBC notes that Canadian owners of mortgaged US real estate are required to not only have up-to-date property insurance in force, but that they must also advise their mortgage broker, mortgage provider or financial institution of proof of insurance every 12 months, to coincide with the normal time frame that property insurance policies remain in force (in other words, renewable on an annual basis).

It’s when a mortgage broker does not receive verification, or catches wind that an insurance policy has been allowed to lapse, that Force-Place Insurance comes into play. And the language used in the RBC bulletin suggests lenders insurance that tends to be more costly with less coverage, is more fact than allegation:

“This type of coverage most likely will be more expensive than the coverage you would purchase on your property, and it may provide less coverage than the policy you would have chosen independently,” notes RBC. “For example, forced place insurance policies generally do not cover personal property or owner liability. Moreover, the costs associated with forced place Insurance are added to the balance of the home equity or mortgage loan.

“Before ordering forced place insurance, your lender is required to send you two notices,” RBC, one of the major Canadian banks, goes on. “The first notice is at the time your insurance policy expires. If no proof of insurance has been provided, a second notice is sent 45 days after the insurance expiration. If you do not provide proof of insurance coverage, your lender can, and likely will, force-place the insurance coverage.”

Some Forced-Placed Insurance Lawsuits allege that lenders insurance placed on their property turned out to be a complete surprise, suggesting that sufficient notice was not given. What’s more, numerous Forced-Place Insurance lawsuits on the part of states Attorneys General, together with plaintiffs banding together in a Force-Place Insurance class action, allege that certain financial institutions and insurance companies collude to force-place inferior insurance coverage on uninsured property at inflated rates, with kickbacks and payments flowing back and forth between the lender and the insurance provider, or so it has been alleged.

Once recent lawsuit (Robin McNeil and Leslie Lewis on behalf of themselves and all others similarly situated v. LoanCare, LLC and American Security Insurance Company, Case No. 1:16-cv-20830-KMW in US District Court, Southern District of Florida, March 8, 2016) alleges that LoanCare and ASIC manipulated the force-placed insurance process that saw LoanCare receive an effective rebate on the cost of the forced-placed insurance, but said rebate was not passed on to the borrower.

Such Forced-Placed Insurance Lawsuits accuse various lenders and insurance companies of fleecing the pockets of borrowers with inferior insurance products and coverage that cost more than standard policies. Some plaintiffs have alleged that little or no notice was given. It has also been alleged variously that lenders will force-place insurance in areas where it is not required or across time frames that overlap windows of time when regular insurance was in force.

As for the allegation that force-place insurance is more expensive with less coverage than standard policies, RBC of Canada appears to hold that such allegations are more fact, than fiction…