New Jersey-based Force-Place Insurance Class Action Can Proceed

Newark, NJAccording to court documents, plaintiff Robert DiGiacomo took on no fewer than four defendants in his class-action Force-placed insurance lawsuit. Those defendants include Statebridge Company LLC, American Modern, American Modern Insurance Group (AMIG), and Midwest Enterprises. Allegations include breach of contract, breach of implied covenant of good faith and fair dealing, violation of the New Jersey Consumer Fraud Act (NJCFA), breach of fiduciary duty, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO).

The defendants, or so it is alleged, “manipulated the force-placed insurance market through collusive agreements involving kickback arrangements and other forms of improper compensation,” DiGiacomo says in his Force-Place Insurance class action.

The defendants immediately filed a petition with the court to have the lawsuit dismissed on various grounds. In his decision this past June, District Court Judge Joseph E. Irenas of the US District Court for the District of New Jersey agreed with the defendants and granted their motion, in part, related to DiGiacomo’s breach of contract claims. However, the remainder of the defendant’s motion to dismiss was denied.

The Lender insurance lawsuit will proceed.

Forced-Placed Insurance Lawsuits regularly appear on the horizon when insurance companies and mortgage lenders (most often banks) combine to issue insurance products that are alleged to be more expensive for the homeowner, with less coverage than standard products. The allegations are that higher fees translate into kickbacks benefiting the lender and/or the insurer.

Owners of a property with a mortgage are legally required to carry sufficient insurance in order to cover the value of the real asset in the event of total loss. Sometimes this coverage is allowed to lapse through neglect or financial hardship. Were the bank holding the mortgage to determine that insurance had been allowed to lapse, then the mortgage holder has the right to step in and force-place lenders insurance on the property with the participation of an insurance company.

It’s a reasonable and legal act.

The problem, according to various plaintiffs bringing Forced-Placed Insurance lawsuits, is that insurance coverage is found to have forced-placed insurance terms that are more expensive than standard insurance, and with less coverage. There have also been cases when Force-Place insurance has been mandated where not appropriate.

The case is Robert DiGiacomo v. Statebridge Company LLC et al., Case No. 14-6694, in the US District Court for the District of New Jersey.