Forced Insurance Lawsuit Settlement
- by Ayden
For instance, a Florida homeowner was charged $4,491 a year for a forced insurance policy. She already had insurance coverage for her home, and the forced policy covered only wind and hail, costing her twice as much as a normal voluntary insurance policy. The cost was so high, that it added to her monthly mortgage payments and led to her foreclosure. Now, the Florida homeowner is seeking compensation from the insurance companies that forced her to sign up for the forced insurance policy.
Bank of America
The Forced Insurance lawsuit against Bank of America has finally settled. The bank canceled the plaintiff’s force-placed insurance in 2012 and required her to carry resale value insurance. This policy covers the difference between the resale value of her home and the remaining balance on her mortgage. This lawsuit was filed by a group of victims, including former mortgage bankers and home buyers.
The lawsuits allege that financial firms placed force-placed insurance policies on homeowners without their consent. These policies are more expensive than standard homeowners’ insurance and push financially-burdened homeowners into a worse situation. The force-placed insurance policies, in many cases, were incredibly expensive, costing borrowers 10 times as much as traditional homeowner’s insurance. Moreover, the policies were not required by law and the mortgage lenders allegedly received kickbacks or unauthorized benefits for the policy.
The lawsuits against the five largest lenders claim that they violated federal and state consumer protection laws by forcing homeowners to purchase force-placed insurance. Banks and mortgage services have agreements with insurance companies that allow them to place the insurance for the borrower. These agreements pay the insurance company a commission for forwarding the premium to the bank. The homeowner is then billed for the premium and commissions. Force-placed insurance premiums totaled over $5.5 billion in 2010, and the numbers keep growing.
When looking at the force-placed insurance industry, QBE ranks high on the list. The force-placed insurer has paid out less in claims than it charges in premiums. That’s called the loss ratio. In 2009 and 2010, QBE had a loss ratio of 18.2% and in 2011, it had a loss ratio of 13.5%. But that’s not a bad thing. For consumers, the loss ratio is still a concern.
The issue is not just a question of whether QBE should pay, but how much. It is important to note that QBE has been subject to numerous government investigations and civil lawsuits for its compensation practices. One of the lawsuits alleges that the firm engaged in kickback schemes, and it claims it is entitled to insurance coverage. In addition, a state government investigation indicates that more lawsuits are pending. Force-placed insurance occurs when banks require homeowners to obtain insurance. The bank purchases the insurance for the borrower. This practice is known as “forced insurance.” And borrowers have filed lawsuits alleging that banks overcharged homeowners for these policies.
The two largest force-placed insurers are QBE and Assurant. Together, they control over 90% of the market. Force-placed insurers cede some of their risk to reinsurers, including mortgage servicers and subsidiaries. The reinsurance agreements are governed by quota share agreements. They must pay out the insured’s claim if it fails to meet the requirements. Even though these insurers are the dominant players, they should be looked at as a service.
Integon National Insurance
Integon National Insurance Company issued a Forced Placed Insurance policy during the relevant period. The insurer failed to properly assess the damages and failed to pay the full benefits due under the policy. The lawsuit seeks attorney fees and penalties. This lawsuit is one of many such lawsuits pending in the U.S. Court of Appeals. It is important to note that Florida has not yet enacted any legislation requiring insurance companies to disclose the origin of these policies.
Integon’s response to the complaint states that it failed to disclose the nature of the claims it had received. However, this argument is not without merit. Ho claims that he was the named borrower on the policy. Since the policy covers any Borrower of the property, he was not the only party who would be impacted by the loss. According to Ho, Integon failed to disclose the fact that the loan was a Forced Placed Insurance policy. As a result, he seeks to recover these fees as well as interest.
Integon also argues that the policy reflects awareness of the Borrower. The court found that Ho did not have standing as a third-party beneficiary. Therefore, the plaintiff must prove that he has the standing to pursue his breach of contract claim. The case is proceeding in federal court in California. A jury is expected to rule on the case shortly. The case is currently ongoing, so stay tuned for updates!
For instance, a Florida homeowner was charged $4,491 a year for a forced insurance policy. She already had insurance coverage for her home, and the forced policy covered only wind and hail, costing her twice as much as a normal voluntary insurance policy. The cost was so high, that it added to her monthly mortgage…
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