Wells Fargo settles forced placement lawsuit for undisclosed amount
Will pay affected owners 11% of premiums
Wells Fargo (WFC) and two insurance companies agreed to repay homeowners in cash up to 11% of the premiums paid before March 24, 2012, in a settlement reached Thursday.
The class-action lawsuit filed in a Florida federal court arises from Wells Fargo “force placing” homeowners with two insurance companies – Assurant Inc. and QBE Insurance Group – when those homeowners failed to maintain property insurance.
Detailed terms of the amount of the settlement were not disclosed, though the agreement did say Wells Fargo and companies would be providing “significant monetary relief.”
“While we believe the lender-placed insurance purchased on behalf of these borrowers was issued in accordance with the terms of the mortgages and applicable laws, we have decided to settle these cases to avoid protracted litigation,” Tom Goyda, a spokesman for Wells Fargo, told HousingWire. “We continue to support our lender-placed insurance services, which provide continuous insurance protection for real property customers when their voluntary insurance lapses.”
“Forced placement” or “lender placed” insurance purchases are not an unusual mortgage servicer practice when the owner does not maintain insurance.
Conflicts arise when banks opt for expensive policies or when they allegedly get commissions from the insurers, though that may not be the case in this instance.
Last week this same judge that approved the settlement granted final approval to another forced placement involving JPMorgan Chase & Co. (JPM) and Assurant, totaling $300 million.
That judge, Federico Moreno, has also ordered an agreement be filed in a separate case against Bank of America (BAC).
In February, Citigroup and Assurant agreed in yet another forced placement suit to pay $110 million to homeowners.