BofA Agrees to $228M Force-Placed Insurance Class Action Settlement

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According to court documents filed last week in Florida federal court, Bank of America NA has agreed to settle a putative class action lawsuit over its force-placed insurance practices for $228 million.

The class action lawsuit accused BofA and BAC Home Loans Servicing of “force placing” overpriced insurance coverage on homeowners. On April 3, the plaintiffs filed a motion for preliminary approval of the BofA force-placed insurance settlement, which would provide significant monetary relief to homeowners as well as “prospective relief that would effectively end the lender-placed insurance (LPI) practices at issue in this case.”

“The settlement’s benefits were the result of hard-fought, arms’-length negotiations between the parties and their counsel, under the direction of a distinguished mediator,” the motion says.

Under the terms of the BofA class action settlement, borrowers who had mortgage loans serviced by BofA and who were charged a premium for lender-placed hazard insurance coverage issued by Balboa Insurance Company, Meritplan Insurance Company, Newport Insurance Company, QBE Insurance Corporation, QBE Specialty Insurance Company, Praetorian Insurance Company, or their affiliates between Jan. 1, 2008 and Feb. 3, 2014 will be eligible for benefits.

Further, the class action settlement prohibits BofA and its affiliates from accepting financial interest in the placement of force-placed hazard policies other than the protection provided by the insurance coverage. The force-placed insurance settlement also prohibits BofA from accepting commissions on force-placed hazard insurance and from using BofA affiliates to place hazard coverage for a period of five years. BofA will also be bound to obtain hazard insurance coverage for lapsed policies at the last known coverage amount, replacement cost value, or the unpaid principal balance on the borrower’s loan, “so that lender-placed coverage bears some relation to the value of the interest being protected.”

The class action lawsuit was initially filed by plaintiff Cheryl Hall on behalf of a nationwide class in July 2012. She alleged that the BofA mortgage agreements required borrowers to maintain hazard insurance on the property, and provided BofA with the ability to force new coverage on the property at the borrower’s expense if the coverage lapsed.

Hall alleged that she had hazard insurance coverage force-placed on her properties. She did not question the defendants’ right to do so, but she took issue with BofA’s arrangement with insurance companies, arguing that they artificially inflated borrowers’ premiums beyond the actual cost of coverage. She claimed that this inflated price covered kickbacks to BofA and other affiliates as well as other costs unrelated to the coverage.

According to the class action lawsuit, the insurer sends a letter to homeowners whose insurance policies are about to lapse, notifying the borrower that lender-placed insurance will be purchased if voluntary coverage is not continued. If the borrower does not obtain coverage, the insurer sends a follow-up letter indicating that new coverage is being placed at the borrower’s expense. However, Hall alleges that these letters are untrue because the force-placed insurance coverage becomes effective as soon as the policy lapses.

BofA is the latest defendant to settle a class action lawsuit related to the practice of force-placed insurance policies. Last month, a federal judge gave final approval to a $300 million class action settlement over JPMorgan Chase’s force-placed insurance policies. Wells Fargo and Citibank have also reached similar settlements.

Further information about the BofA force-placed insurance settlement was not immediately available. Keep checking www.TopClassActions.com or sign up for our free newsletter for the latest updates. You can also mark this article as a “Favorite” using your free Top Class Actions account to receive notifications when this article is updated.

The plaintiffs are represented by Kozyak Tropin & Throckmorton PA, Podhurst Orseck PA and Harke Clasby & Bushman LLP.

The Bank of America Force-Placed Insurance Class Action Lawsuit is Cheryl Hall, et al. v. Bank of America NA, et al., Case No. 12-cv-22700-FAM, in the U.S. District Court for the Southern District of Florida.

UPDATE: On Feb. 1, 2016, the Bank of America Forced-Placed Insurance Settlement Claims Administrator announced that the checks have been disbursed. All Class Members who filed a valid and timely Claim Form should keep an eye on their mailbox, checks are on the way!