Forced Placed Policies

Dallas insurance attorneys who deal with homeowners claims are usually going to have some familiarity with forced-placed insurance policies.
Most people will not ever have to deal with forced placed policies, but if you do, it can be a nightmare.
Forced place insurance is an insurance policy taken out by a lender or creditor when a customer does not carry insurance on an asset. The charges for this insurance are passed on to the customer.
The most common types of forced place insurance are auto and homeowners insurance.
Lenders take out forced place policies to protect their investments in case the collateral is damaged or destroyed. Without this insurance, lenders might be unable to recover loan balances.
Forced place insurance is obtained through high-risk insurance companies. Standard companies are unwilling to provide this coverage because of the high probability of loss.
Because borrowers who do not carry the necessary insurance coverage on assets represent high risks, premiums for forced place coverage are typically much higher than standard insurance premiums.
The Insurance Journal published an article title, JP Morgan, Assurant Settle Force-Placed Insurance Claims for $300M.
The article tells us JPMorgan Chase & Co and a major insurer have agreed to a $300 million settlement to resolve accusations that they forced homeowners into over-priced property insurance and entered into kickback arrangements that inflated the policies’ prices.
The lawsuit being settled said that the improper practices unjustly enriched JPMorgan and insurer Assurant Inc. by more than $1 billion since 2008.
JPMorgan and Assurant did not admit any wrongdoing as part of the settlement.
The settlement calls for JPMorgan to stop accepting commissions for force-placed insurance.
The JPMorgan settlement is the first nationally to result from several cases against banks pending in Miami federal court that involve force-placed insurance.
Banks have been under increasing scrutiny from regulators over force-placed insurance, which is placed by a bank or other mortgage lender to protect their interests in a property if the homeowner’s insurance lapses.
Mortgage agreements give lenders the right to force-place insurance, but regulators have accused banks and insurance companies of pushing up policy prices with improper commission and reinsurance agreements.
The nation’s largest force-placed insurer, Assurant placed about 1.3 million policies for JPMorgan Chase, collecting more than $2.4 billion in force-placed premiums since 2008, according to court documents filed by plaintiffs.
Assurant in March agreed to pay $14 million to settle a probe by the New York state insurance regulator over its business arrangements with banks and mortgage servicers. Assurant neither admitted nor denied wrongdoing when it settled that investigation.
The New York Department of Financial Services had accused Assurant of paying commissions to banks and other mortgage servicers that created an incentive for the banks to force-place higher-priced policies.
Typically, Assurant entered into agreements that let reinsurance companies owned by banks take as much as 75 percent of the profit for sharing risks.
In a statement announcing that settlement, New York Governor Andrew Cuomo said JPMorgan made about $600 million since 2006 by taking 75 percent of the profits from the force-placed business it gave Assurant.
National lawsuits over force-placed insurance are still pending in Miami against Citigroup, Wells Fargo, Bank of America and HSBC Bank (USA), part of London-based HSBC.
A state-wide Florida lawsuit against Wells Fargo and QBE Insurance Corp. was settled in May for about $19 million.