Force-Placed Insurance: Did Banks and Insurers Collude to Rip Off Consumers?

Would you let your mortgage lender or servicer purchase wind, hazard or flood insurance on your home? For most homeowners, the answer would be a resounding no. Yet force-placed insurance, which has proven to be financially ruinous for many consumers, is more common than you might think.

Although many mortgage contracts allow a bank to force-place coverage for wind, flood or hazard insurance on a property if the owner fails to maintain required coverage, while once rare, the chaos created by the housing crises has made the force-placing of insurance an all-to-common occurrence in recent years.  Unfortunately, force-placed policies generally cost as much as 10-times more, and offer far less protection, compared to standard insurance policies most people can obtain on their own. For many already-struggling property owners, hefty premiums for a forced-placed policy were what finally drove them into foreclosure.

Regulators Set Their Sights on Force-Placed Insurance Market

Our recent investigations and others by state regulators have found that collusion between banks and insurers made this sad situation far worse than it needed to be. For example, last year an investigation by the New York Department of Financial Service determined that profit sharing between lenders and insurers inflated the price of force-placed insurance by creating incentives for banks and mortgage servicers to buy policies with high premiums

“Our investigation found that insurers and banks built a network of troubling relationships and payoffs that helped drive premiums sky-high,” Benjamin M. Lawsky, New York’s top financial regulator, said earlier this year. “Those improper practices created significant conflicts of interest and saddled homeowners, taxpayers and investors with millions of dollars in unfair and unnecessary costs.”

New York recently reached a large settlement with Assurant, one of the largest providers of force-placed insurance. According to a report from The New York Times, the settlement included several provisions that prohibit some commissions and expenses.  And in September 2013, Governor Andrew Cuomo proposed new regulations that would, among other things, eliminate kickbacks in the industry that drove up premiums.

What to Do If You’ve Been the Victim of Force-Placed Insurance

If you were forced into foreclosure or had your credit ruined because of force-placed insurance, you do have rights. Right now, hundreds of consumers around the country are seeking compensation against banks and insurers that may have engaged in predatory practices and improperly force-placed insurance on their homes. Gilman Law LLP is already representing numerous plaintiffs in force-placed insurance lawsuits, and continues to investigate claims against a number of big mortgage lenders, including:

  • Bank of America
  •  HSBC
  • Green Tree
  • Nationstar
  • Chase
  • Citizens Bank
  • US Bank
  • Ally Financial, Inc., formerly GMAC
  • Insurers: Assurant, American Security, QBE, and Balboa

Now that regulators are finally paying attention, consumers may face their best chance for receiving compensation for the financial harm they suffered due to the industry’s unscrupulous practices. The attorneys at Gilman Law LLP believe that in some cases, homeowners who had insurance imposed on their property could be due damages equal to as much as 20% of the premiums they were assessed for force-placed policies.

Victims of force-placed insurance only have a limited time in which to act. To make sure your claim for restitution isn’t time barred by your state’s statute of limitations, please contact Gilman Law LLP by filling out our online free consultation form, or CALL TOLL FREE (888) 252-0048.

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