What are your remedies when your bank overcharges you for "force-placed" insurance?
When homeowners borrow against their homes, lenders often require that the home be protected by adequate insurance coverage. If the bank deems the insurance inadequate, it may obtain additional insurance for the home and require the borrower to pay for it. The charges are usually added to a homeowner's monthly loan statement.
But so-called "force-placed" coverage can be expensive, and homeowners may feel powerless to contest the fees. Force-placed insurance has been a source of abuse when banks fail to notify homeowners properly or overcharge them. A series of recent settlements, however, may indicate a shift in the balance of power.
PNC Bank recently agreed to pay $32 million to homeowners to settle a Florida class action alleging that the bank overcharged homeowners for force-placed insurance. The settlement will benefit 130,000 mortgagors who had hazard, flood, flood-gap or wind insurance coverage imposed on their property. Homeowners will recover 50 percent to 100 percent of the damages they might have received had they won at trial, according to the plaintiffs' attorneys. The settlement will also stop PNC from increasing insurance charges on homeowners for five years.
Similar settlements have been reached in the past with other lenders. Wells Fargo settled a force-placed insurance suit in 2013 for $19.25 million, while J.P. Morgan Chase and Assurant settled for $300 million in 2014. Bank of America paid $228 million in 2014 to settle litigation over overcharging of homeowners, while HSBC and three insurers paid a settlement of $32 million in another case.
The most recent case arose from PNC's alleged overcharging of mortgagors for new insurance coverage to secure their property. While their mortgage agreements with borrowers allowed them to force coverage on a property and warned that its cost could exceed the borrower's voluntary coverage, homeowners claimed they were overcharged for below-cost services. The settlement came after lengthy negotiation and mediation spanning weeks.
While it is never easy to wage a legal battle against banks and insurance companies, the recent spate of cases suggests that, when it comes to force- placed insurance,homeowners in Florida have a fighting chance.