Wells Fargo Bank NA and Assurant Inc. have settled a putative class action lawsuit in an Illinois federal court. The two companies were accused in the case of conspiring to inflate the cost of force-placed hazard insurance in order to provide kickbacks to the bank. The settlement in the Illinois case was said to be related to another settlement in Florida. That settlement was in a case (Fladell et al v. Wells Fargo Bank NA) involving the very same issues. The Defendants settled for an undisclosed amount, promising “significant monetary relief” to customers. Plaintiffs in those two cases had tried in 2013 to join in a multidistrict litigation case. Their efforts were unsuccessful.
In the Florida case, class members received cash payments equal to 7 to 11 percent of the premiums they paid. Wells Fargo was accused in both cases of striking an agreement with Assurant to exclusively use the insurance company or its subsidiaries — including American Security Insurance Co., which is named in the suit — to provide forced-place insurance. Assurant would then inflate premiums up to 10 times market value and Wells Fargo would receive a kickback or commission from each sale. In this case, class members alleged they had to pay for unnecessary retroactive coverage for periods when no loss had occurred and said Wells Fargo misappropriated money from their escrow accounts, violating fiduciary duties and breaking the terms of its lending contracts. The bank has said it disclosed to borrowers that it would earn commissions from the policies and its borrowers were repeatedly warned that force-placed insurance would be more costly than if they took out their own insurance.
The Illinois case, filed in July 2012, involves borrowers in Illinois, Texas and New York. Another putative class action was filed against Wells Fargo and Assurant regarding force-placed hazard insurance on May 5. The day before, Assurant was named in a similar putative class action with PNC Bank. In 2015, Assurant, paired with various lenders, agreed to pay at least $141.8 million in settlements for similar cases. In 2013, Assurant had to pay $14 million to New York state to end an investigation by regulators over its force-placed insurance. In 2012, Assurant, along with QBE/Balboa, controlled 99.7 percent of the force-placed insurance market, according to the Center for Economic Justice.