The Wells Fargo and Assurant lawsuit (case number 3:15cv671, in U.S. District Court for the District of Connecticut) was filed by Jeffrey Navin and John O’Reilly, and seeks to represent similarly situated plaintiffs. In court documents, the plaintiffs allege Wells Fargo and Assurant obtained “improper financial benefits by imposing force-placed insurance policies on properties, some of which are already covered by homeowners insurance policies purchased by the homeowner.”
Force-placed insurance is insurance put on a property where the insurance coverage has lapsed to cover the mortgage lender’s stake in the property. But lawsuits allege a variety of complaints against companies involved in force-placed insurance. These complaints include force-placing insurance when the homeowner has a current policy, force-placing insurance for non-existent hazards (such as floods when the property is not in a flood zone), retroactively applying the insurance to periods when no claim was made against the property or there was no risk of loss, charging excessively high fees because the homeowner is not able to purchase commercially available insurance, charging for policies that covered more than the lenders’ stake in the property, and charging high fees to cover illegal kickbacks to lenders.
In some cases, force-placed insurance costs up to 10 times the rate of traditional homeowner insurance, even though force-placed insurance often has limited coverage.
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Some companies involved in force-placed insurance have settled lawsuits. According to Gordon Gibb, writing for LawyersandSettlements, in April HSBC agreed to pay $1.8 million to settle a force-placed insurance lawsuit.