Encino, CAA force-placed insurance lawsuit filed against Bank of America seeks class-action status. The lawsuit, filed in California in 2012 by Christopher Gustafson, alleges Bank of America provided force-placed insurance from its own affiliates at a high cost to the borrower while receiving fees, payments or commissions from force-placed insurance providers. Force-placed insurance lawsuits have been filed against a variety of banks alleging the banks engaged in abusive and unfair practices.
According to court documents (case number SACV-11-00915-JST-AN, United States District Court, Central District of California), Christopher Gustafson filed his lawsuit against Bank of America alleging “unlawful, abusive and unfair practices with respect to force-placed insurance…” The lawsuit notes that when borrowers do not maintain their hazard insurance policies, mortgage loan servicers replace those insurance policies with force-place policies, which are typically more expensive than the original policies but have less coverage. Finally, the mortgage loan servicer allegedly receives financial gain in the form of fees, payments or commissions for using the force-placed insurance.
“Further, such policies often provide unnecessary or duplicative coverage, in that they are improperly backdated to collect premiums for time periods during which the mortgagor has absolutely no risk of loss,” the lawsuit alleges. Ultimately, force-placed insurance makes more money for the loan servicer, costs the homeowner more money with less protection and forces borrowers to pay for insurance that is unnecessary. The defendants do this without any attempt to provide competitive pricing for the insurance, the lawsuit alleges, but makes money off the transaction, constituting “exploitative profiteering and self-dealing” and a violation of mortgage contracts.
The lawsuit alleges that Bank of America used a force-placed insurance policy on his mortgage with a premium of $1,045, almost two times the original insurance premium of $614. Furthermore, the coverage exceeded the lender’s stake in the property because the coverage was for more than $76,000, where as the outstanding balance on the loan was for less than $48,000.
Other lenders have also faced lawsuits concerning their use of force-placed insurance and their failure to disclose that they received a fee or commission for using such insurance, which provides an incentive to go with prearranged policies rather than offering competitive solutions or allowing the borrower to have input into the conditions of the policy.
If you or a loved one have suffered losses in this case, please click the link below and your complaint will be sent to a financial lawyer who may evaluate your Force-Place Insurance claim at no cost or obligation.