Wells Fargo, QBE Agree on $19.3M Force-Placed Settlement.
Byline: Arthur D. Postal, PropertyCasualty360.com
have agreed to settle a lawsuit dealing with
force-placed insurance policies in Florida involving 24,000 borrowers.
The companies will pay $19.3 million to compensate the borrowers.
The settlement in federal district court in Miami deals with claims
that the bank and QBE overcharged homeowners in Florida for force-placed
insurance. The class-action lawsuit is one of three filed in connection
with alleged overcharging of homeowners for force-placed insurance,
which became a huge business in the wake of the housing bust.
The two others were filed in
Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
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officials. Best estimates are that the business has $2.6 billion in
annual written premiums.
In other action, the regulator of Fannie and Freddie has proposed a
rule that would bar force-placed insurance underwriters from paying fees
and commissions to banks who own or service home mortgages that are
either delinquent or in foreclosure.
California and New York insurance regulators are also acting to
bring down rates in those states, and New York has settled with Assurant
and QBE recently on that issue.
Also, the Florida Insurance Department will hold a hearing Monday
to discuss American Security Company’s proposal to keep average
rates statewide at the same level now levied.
The proposed rate would become effective August 1, 2013 for any new
and renewal business. The proposed rate change is not uniform and some
areas of the state are subject to higher rates.
American Security is an admitted Florida insurer and has the
largest market share of lender-placed policies with more than 142,000
representing a total premium of $508 million in the state, according to
Kevin McCarty, state insurance commissioner.
In the lawsuit settlement, filed Monday, Wells Fargo and QBE agreed
to repay borrowers who paid the premium 25 percent in cash. Those who
were charged the premium but didn’t pay will get a credit of 25
percent off their bill. In addition, the defendants agreed to pay up to
$5.48 million of the plaintiffs’ attorney’s fees and costs.
The class-action lawsuit was filed in 2011 and certified in Feb.
The suit alleged that “Wells Fargo and QBE inflated these
insurance premiums and profited from kickbacks and commissions from the
force-placed insurance scheme.”
The lawsuit charged that Wells Fargo and QBE, the second-largest
provider of force-placed insurance, had an exclusive agreement in which
QBE searched the bank’s records for homeowners with lapsed
After the lawsuit was filed, Wells Fargo said it would no longer
purchase force-placed insurance from QBE in Florida.
In filing the lawsuit, Lance A. Harke of Harke Clasby & Bushman
, Miami, alleged that, “This scheme to inflate and profit from
force-placed insurance is a clear violation of
our State’s most vulnerable and disadvantaged homeowners.”