In February, a federal judge here cleared the way for a class-action suit
alleging that Wells Fargo Bank and Australia-based QBE Insurance Group
conspired to overcharge homeowners for force-placed insurance. Tremors from the
court decision are being felt wherever Florida homeowners insurance customers
gather to talk.
As
many as 20,000 Florida homeowners could be party to such a suit, with an estimated
$50 million in premiums at issue.
When
Judge Robert N. Scola Jr. of the U.S. District Court for the Southern District let
the suit move forward, he gave additional standing to the allegations. He openly
cited plaintiffs’ claims that the bank and insurance company “colluded in a
scheme to artificially inflate the premiums charged to homeowners.” Furthermore,
he said the bank has threatened to retaliate against homeowners who are parties
to the suit.
Wells
Fargo disputes both the facts of the case and the notion that it poses any kind
of threat to Florida homeowners insurance customers. “Wells Fargo has no intention
of taking the actions referenced with regard to our customers,” a bank
spokesman said after the judge’s actions.
Force-placed
insurance is insurance a homeowner is coerced to buy to protect mortgage
lenders. It most often occurs when a homeowner has let an insurance policy
lapse. In such cases, many contracts allow lenders to buy the insurance and
pass along the cost of it. In the housing crisis of the last several years as
homeowners struggled to meet obligations, force-placed insurance increasingly came
into play.
The
problem is that on occasion the insurance has been forced on homeowners who
already were covered. A bigger problem is that force-placed insurance premiums
usually are higher—sometimes significantly higher—than a regular policy.
Critics say the higher premium is unwarranted.
Furthermore, because a bank and insurance company each
profit from the forced placement of the insurance—in a case or two, a bank has
been known to own the insurance company involved— the incentive to impose the deal on the homeowner is great.
Though
this class-action suit is moving along in Miami Florida homeowners insurance
customers are not the only alleged victims of the practice.
The
office of the superintendent of New York State’s Department of Financial
Services is probing into the possibility that several major banks dealt a
similarly bad hand to New York state homeowners. A university professor in Ohio
has testified before the Senate Banking Committee about his personal experience
of having flood insurance forced upon him when his property already was covered
by a policy. And 40,000 homeowners in Minnesota
won $9 million last year from Chase Home Finance in a class-action suit over
forced-placement insurance.
Clearly, Florida homeowners insurance customers are part of a larger pattern of complaint across the country, which could give momentum to their cause. If you are looking for additional information on Orlando Florida home insurance, click here!
