Forced-Place Insurance Continues to Trigger Lawsuits

Sacramento, CAThe parade of Lender insurance lawsuits continues unabated in spite of legislators in various states attempting to put checks and balances in place aimed at preventing allegedly unnecessary and unjust placement of expensive lender insurance products. One of the more recent class actions accuses US Bank NA of systematically abusing its right to force-place insurance on mortgaged property.

And it is its right to do so. Often lost in the conversation is the fact that any entity that holds a mortgage on property or real estate issues such a mortgage knowing that it is the owner’s responsibility to place adequate insurance on the property to ward against catastrophic loss. Were a homeowner to allow an insurance policy to lapse, or is seen as carrying insurance that proves to be inadequate when compared against the real or replacement value of the property, the mortgage holder has the authority to arbitrarily Force-Place insurance on the property, as needed.

The problem is that numerous banks have cozied up to insurance companies in a scheme that has seen homeowners with either more insurance than they need or lenders insurance that costs much more in premiums than more traditional forms of insurance. When this happens, Forced-placed Insurance Lawsuits often follow.

Plaintiffs in Barnard v. US Bank NA, No. 15-0008, filed January 8 of this year in the Southern District of Ohio, allege US Bank improperly purchased backdated, retroactive policies, charged borrowers for expired or partially expired coverage, and arranged for kickbacks for placing policies. Along with US Bank, defendants include Assurant Inc., Voyager Indemnity Insurance Co. and American Security Insurance Co.

Meanwhile, one defendant in another Force-placed insurance lawsuit attempted to have the lenders insurance lawsuit against them stayed because the co-defendant, Ocwen Loan Servicing LLC, had reached a settlement in principle in another forced-placed insurance class action (Lee v. Ocwen Loan Servicing, LLC, Assurant, Inc. and American Security Insurance Co., case No. 0:14-cv-60649-JAL (Lee), pending in US District Court for the Southern District of Florida.

“Because it appears that plaintiffs’ action will proceed in this Court regardless of whether the Lee settlement is ultimately approved - and because the only hardship proffered by moving defendants is the inconvenience of litigating two potentially duplicative actions the Court denies defendants’ request for a stay,” Judge Christina A. Snyder wrote in her January 6, 2015 order.

The Forced-place insurance lawsuit that will move forward as a result of the failed motion to stay is Shane Valdez, v. Saxon Mortgage Services, Inc. et al., Case No. 2:14-CV-03595-CAS(MANX), in the Central District of California.