According to South Florida Business Journal (5/16/13), the force-placed insurance lawsuit alleged Wells Fargo forced coverage on them when their homeowners’ insurance policies lapsed. That coverage, provided by QBE Insurance, allegedly had extremely high premiums. Court documents claim the homeowners paid insurance premiums of approximately $75 million. They further claimed Wells Fargo insurance agents received a commission for business sent to QBE.
The Sun-Sentinel (5/17/13) reports that because of force-placed insurance, homeowners who did not miss any mortgage payments had their homes foreclosed on because the monthly insurance payment was too high. One of the plaintiffs in the lawsuit reportedly had monthly payments of $20,000 a month because of force-placed insurance fees.
Although Wells Fargo agreed to the settlement, it has not admitted to any wrongdoing in the lawsuit. Approximately 24,000 homeowners were included in the class action, which was scheduled to go to trial in July.
Wells Fargo is not the first company to face consequences for force-placed insurance. Assurant Inc reportedly agreed to pay $14 million in penalties earlier this year for its force-placed insurance practices. The penalties will be paid to the State of New York, which launched an investigation into the company’s practices.
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That does not help homeowners who have been forced into foreclosure because of the allegedly high premiums on force-placed insurance. In some cases, force-placed insurance can cost up to 10 times a voluntary insurance policy, but with much less coverage.
Critics of the insurance call it price gouging, and claim insurance companies are profiting off people’s financial woes. They also point to commissions and fees banks receive when they assign force-placed insurance to homeowners.
Homeowners are fighting back against what they say are unethical and illegal policies by filing lawsuits such as the one against Wells Fargo. Meanwhile, insurance regulators are looking into the practice to ensure consumers are protected.