In a settlement involving a force-placed insurance lawsuit, the huge financial firm Wells Fargo has agreed to pay $19 million to settle claims about its force-placed insurance practices. The force-placed insurance class action was filed in 2011 against Wells Fargo on behalf of Florida homeowners. The lawsuit alleged Wells Fargo forced coverage on them when their homeowners’ insurance policies lapsed. That coverage, provided by QBE Insurance, had extremely high premiums. The homeowners, who paid insurance premiums of approximately $75 million, claimed that Wells Fargo insurance agents received a commission for business sent to QBE.
The homeowners, who did not miss any mortgage payments, and were otherwise current, had their homes foreclosed on because the monthly insurance payments were too high and they couldn’t pay them. This was because of the high cost of the force-placed insurance. One of the plaintiffs in the lawsuit reportedly had monthly payments of $20,000 a month because of force-placed insurance fees. Approximately 24,000 homeowners were included in the class action, which was scheduled to go to trial in July.
Wells Fargo is not the first company to face consequences for force-placed insurance. For example, Assurant Inc agreed to pay $14 million in penalties earlier this year for its force-placed insurance practices. The penalties will be paid to the State of New York, which launched an investigation into the company’s practices. Force-placed insurance is put on homes where homeowners insurance has lapsed, but it comes with high premiums, making it difficult for homeowners who are struggling financially to pay their bills. But insurance companies claim that force-placed insurance, also referred to as lender-placed insurance, is vital to keeping homes insured. While that may be true, the rates should be reasonable.
Many homeowners have been forced into foreclosure because of the high premiums on force-placed insurance. In some cases, force-placed insurance can cost up to 10 times a voluntary insurance policy, but with much less coverage. This is a prime example of price-gouging, with insurance companies profiting off people’s financial woes. It’s quite evident that the commissions and fees banks receive when they assign force-placed insurance to homeowners can be most unreasonable. Homeowners are fighting back against what they say are unethical and illegal policies by filing lawsuits such as the one against Wells Fargo. Meanwhile, insurance regulators should take action to make sure consumers are protected.
Source: The Claims Journal
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