“Bank of America believes that its lender-placed hazard insurance practices comply fully with state and federal law,” bank spokesman Richard Simon said, in a statement. “Nevertheless, in order to put an end to this litigation, we have reached a settlement that is acceptable to all parties.”
QBE Insurance Corp., the other defendant in the Force-placed insurance lawsuit, did not comment. But if Bank of America fully complied with state and federal law, as the statement implies, then it did so while simultaneously violating state and federal laws, including the US Racketeer Influenced and Corrupt Organizations Act (RICO), or so it was alleged by plaintiffs.
Rather than go to trial, it appears that Bank of America and QBE will pony up $228 million to make it all go away.
The settlement, reached in Miami federal court, is just the latest in a string of large settlements stemming from Forced-Placed Insurance Lawsuits that accuse banks and insurance carriers of inflating premiums unnecessarily on lenders insurance.
The latter is a product that banks, when holding a mortgage on a property, will apply to an asset if and when the homeowner either fails to maintain the proper insurance coverage or allows insurance to lapse. With a financial stake in the property, mortgage holders (the bank) are understandably unhappy with such a situation and will take steps to impose a Force-Place insurance policy on the asset, a function that is a protected right within any mortgage agreement. To wit, the homeowner is required to carry adequate insurance. Failing that, the bank has the authority to place insurance on the asset to protect the investment.
More money for less coverage
Sounds fair. But here’s where things have gone off the rails. Many homeowners have found that not only are the forced-placed insurance terms far more costly than conventional insurance, the amount of coverage is often less than conventional products.
Many a force-placed insurance lawsuit has claimed that this is due to an alleged cozy relationship between the banks holding the mortgages and the insurance carriers providing the insurance products. There have been allegations of kickbacks, with the costs of those kickbacks passed along to the consumer by way of inflated premiums.
There have been several settlements. The latest $228 million settlement agreed to by Bank of America and QBE - while claiming to have complied with all state and federal laws - is just the latest installment in a serial nightmare for affected homeowners.
READ MORE FORCE-PLACE INSURANCE LEGAL NEWS
The settlement places Bank of America amongst other banks having settled similar lawsuits in recent months, including JPMorgan Chase, Citibank and HSBC Bank USA.
The case is: Cheryl Hall et al v Bank of America N.A. et al, US District Court, Southern District of Florida, Case No. 12-cv-227