Terms of the settlements involving Bank of America and HSBC are confidential, while the Citigroup lawsuit was reportedly settled for $110 million. Reuters (2/6/14) reports that class members will receive 12.5 percent of their premium once their claim is submitted.
Plaintiffs in the Citigroup lawsuit alleged Citigroup and Midland Mortgage “unfairly, unjustly and unlawfully forced Plaintiff and other Putative Class members to purchase and maintain flood insurance in amounts greater than required by law, greater than required by their mortgage agreements, and greater than Defendants’ financial interest in their property,” according to court documents.
Furthermore, the lawsuit alleges, the defendants profited from force-placed insurance by arranging for “kickbacks, commissions, or other compensation for Defendants and/or their affiliates.”
The plaintiff in the lawsuit, Gordon Casey, alleges he was told by First CitiMortgage that he would have to increase his flood coverage from $30,300 to more than $100,000 or the company would purchase a flood insurance policy for him, despite there being no such requirement on his mortgage or loan documents. Ultimately, CitiMortgage allegedly force-placed a flood policy of an additional $107,780 in flood coverage, with a premium cost of $970. This was, according to the lawsuit, unnecessary because Citigroup’s stake in the property was covered by the existing flood insurance policy.
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The settlement prohibits Citigroup from accepting commissions for force-placed insurance for six years.
Meanwhile, Wells Fargo will also pay to settle claims of forcing property owners to pay for insurance at excessively high rates. According to Bloomberg Businessweek (3/6/14), the amount Wells Fargo will pay has not been made public.
The Wells Fargo lawsuit is Fladell v. Wells Fargo Bank N.A., 13-60721, US District Court, Southern District of Florida. The Citi lawsuit is Gordon Casey, Duane Skinner and Celeste Coonan, individually and on behalf of all others similarly situated vs Citigroup Inc., Case No. 12-00820, U.S. District Court, Northern District of New York.