More Settlements Announced in Force-Placed Insurance Lawsuits

Miami, FLThe recent months have brought news of even more settlements in force-placed insurance lawsuits. In the past few months, various banks and financial firms have announced that they settled lawsuits involving lender insurance. Lawsuits filed against the banks and insurance companies alleged they were involved in an illegal kickback scheme to place insurance on homes and properties.

Recently, SunTrust, Midfirst and GMAC all announced settlements in their lawsuits concerning force-placed insurance. In the SunTrust Mortgage lawsuit (case number 0:13-cv-60749), plaintiffs alleged insurance premiums were inflated thanks to an agreement with QBE Specialty Insurance in which SunTrust allegedly received a kickback for placing QBE insurance on homes. The class reportedly involved more than 127,000 force-placed insurance policies over six years. As part of the settlement, SunTrust will reportedly return more than 10 percent of the premium from placing insurance policies.

Plaintiffs also alleged that the QBE policies were more than 15 times higher than previously used policies. They further alleged that they were not told how expensive the policies could be and that in some cases mortgage servicers retroactively place the insurance policy on a property to cover temporary lapses in coverage, even when no claims were made during that period.

“When the excessively priced insurance is force-placed on homeowners, already struggling to keep up with their mortgage payments, it often pushes those homeowners into foreclosure,” court documents state. The plaintiffs further note that the defendants have turned force-placed insurance policies into a “severely inflated profit-making machine.”

The named plaintiff in the SunTrust lawsuit, Carina Hamilton, had an insurance policy from July 21, 2007 to July 21, 2008, with a premium of $2,400. After insurance was force-placed on her property, Hamilton’s premium from April 22, 2010 to April 22, 2011 jumped to $10,181, even though her property value was only $84,000. The lawsuit alleged the premiums were excessive because they were higher than the cost of the services and were not reasonable to protect the mortgage lender’s interest in the property.

Meanwhile, Midfirst Bank also settled a lawsuit regarding force-placed insurance. The settlement will see Midfirst pay $2.7 million to resolve allegations that customers were forced to buy unnecessary and excessive flood insurance on their properties. The settlement reportedly affects up to 15,000 class members.

GMAC also announced a settlement in its force-placed insurance lawsuit. That settlement, which awaits a judge’s approval, will see GMAC pay $6.25 million.