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Defendant Hit with Yet Another Force-Placed Insurance Lawsuit

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Philadelphia, PALess than a month after insurance giant Assurant Inc. and HSBC Bank settled a Lender insurance lawsuit for $1.8 million, a subsidiary of Assurant and PNC Bank were hit with another Force-placed insurance lawsuit alleging inflated premiums and kickbacks in violation of the Racketeer Influenced and Corrupt Organizations Act.

The plaintiff in this case is Michael Dobson. According to court documents, Dobson duly carried flood insurance on his property, which he maintains met his obligations according to the criteria associated with his lender. The premium was $500 per year. PNC, however, held that the insurance was inadequate and is alleged to have mandated additional Force-Place Insurance for the property at inflated rates.

The plaintiff, at the time, did not oppose the lenders insurance out of fear he might lose his home, or so it is alleged.

Lender insurance is a tool available to lenders and mortgage holders in the event a property owner allows insurance to lapse, or maintains coverage that is legitimately found to be insufficient. In such circumstances, a lender has the right to force-place insurance necessary to cover any unforeseen loss.

The problem, according to plaintiffs in Forced-Placed Insurance Lawsuits, is that lenders have in many instances teamed up with insurance providers to force-place additional insurance when and where it is not needed. These insurance products have often been found to provide less coverage than traditional policies, at higher premiums. It is alleged that the higher premiums translate to kickbacks to banks from the insurance provider in exchange for bringing them new business.

Various Attorneys General at the state level have been clamping down on the practice that often sees rates as high as 10 times the market price for similar products.

The defendants in the lawsuit are PNC Bank (PNC) and American Security Insurance Co. (ASIC), a subsidiary of Assurant. “PNC, ASIC and their affiliates induced, and attempted and conspired to induce, plaintiff and the class to pay these extra-contractual amounts, which were in excess of PNC’s force-placed insurance costs and not due under their respective mortgage loan agreements, through the wrongful use of actual or threatened fear of economic harm,” the Force-placed insurance lawsuit states.

“The notices and statements lull borrowers into believing that no fraudulent scheme is occurring and that PNC and ASIC and/or their affiliates are simply exercising PNC’s rights under borrowers’ mortgage loan agreements,” the complaint states. “By lulling plaintiff and the class into a false sense of security, the notices and statements make it less likely that borrowers will object to the improper charges, complain to the authorities or bring lawsuits.”

In April, ASIC and HSBC Bank agreed to pay $1.8 million in order to settle a Force-placed insurance lawsuit. Also in April, Assurant and Ocwen Financial Corp. agreed to a $140 million settlement to set aside similar allegations in a similar forced-placed insurance class action.

The case is Dobson v. PNC BANK NA et al., Case No. 2:15-cv-00582, in the US District Court for the Western District of Pennsylvania.


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