Forced Wind Insurance Lawsuits
- by Ayden
The Florida homeowner who was charged $4,491 a year for a force-placed wind insurance policy did not need the coverage because she already had an adequate voluntary policy. Additionally, her insurance policy covered only wind and hail, which made it more than twice as expensive as a voluntary policy. The additional costs were tacked onto her monthly mortgage payments, which contributed to her foreclosure. Fortunately, the case is now being heard in the Florida federal court.
A lawsuit against Wells Fargo has been filed by consumers who were ripped off by the company’s insurance sales practices. The company improperly placed insurance policies on homeowners based on the mortgages they arranged. Insurers, in turn, charged exorbitant rates and charged Wells Fargo kickbacks for the placement of the insurance policies. This was illegal and a class action lawsuit was filed to recover the costs.
The complaint also alleged that the Wells Fargo vendor failed to verify that borrowers had insurance coverage. To obtain such information, Wells Fargo relied on an outside vendor to monitor the borrowers’ insurance coverage. Although the company should have communicated with borrowers before forcing insurance on them, the vendor could not do so. This is a glaring error, especially for an established company.
A recent Forced Wind Insurance lawsuit filed against Bank of America claims that the bank charged a customer nearly $4,500 a year for a force-placed insurance policy. The homeowner already had adequate insurance coverage, but the bank forced the customer to purchase wind and hail damage insurance. The force-placed policy costs more than double the cost of a standard comprehensive insurance policy, and forced-placed insurance often provides inadequate coverage. The bank has since established subsidiaries to provide force-placed insurance policies.
The compensation arrangements behind Forced Wind Insurance policies have been the subject of court opinions and publicly-filed deposition testimony. One representative from Chase refers to them as “industry-wide practice.”
Bank of America
In Florida, a homeowner was charged $4,491 a year for a forced wind insurance policy, even though they had the proper insurance coverage. This policy covered only wind and hail and was nearly twice as expensive as a voluntary policy. It also added to the homeowner’s monthly mortgage payment, contributing to the foreclosure. So, who is responsible for the costs? Bank of America, U.S. Bank, and Countrywide Home Loans are each named defendants in the lawsuit.
Schilke’s complaint claims the Wachovia fees were “kickbacks” and calls the disclosures made by the bank deceptive. This, however, does not make sense. While the transaction between the parties was disclosed in full, Schilke’s complaint fails to show any evidence that Wachovia was acting on Schilke’s behalf. The loan agreement clearly states that the insurance requirement is for the lender’s protection, not the homeowner’s.
A lawsuit filed by a wind insurance policyholder against Zions Bancorp alleges that the bank reneged on its agreement to pay $266 million in installments of Series D Fixed Rate Cumulative Preferred Stock. The Treasury Department recovered this money through the Troubled Asset Relief Program or TARP. Zions has agreed to return about half of this amount to the Treasury, which is expected to be completed by the end of 2012.
The settlement does not cover stand-alone wind insurance policies or flood insurance policies. Nonetheless, ZION’s customers will receive 11 percent of the net written premium they paid for the insurance policies. Similarly, customers of Countrywide Home Loans and Bank of America NA will receive 6.5 percent of the net premium charged. Both parties expect to receive a substantial payout, but the amount will likely vary from policy to policy.
The Florida homeowner who was charged $4,491 a year for a force-placed wind insurance policy did not need the coverage because she already had an adequate voluntary policy. Additionally, her insurance policy covered only wind and hail, which made it more than twice as expensive as a voluntary policy. The additional costs were tacked onto…
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