Judge Approves $500K U.S. Bank Force-Placed Insurance Class Action Settlement

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A $500,000 class action settlement was preliminary approved by a California federal judge to resolve charges against U.S. Bank and American Security Insurance over their alleged force-placed insurance practices.

U.S. Magistrate Judge Laurel Beeler granted preliminary approval to the force-placed insurance class action settlement on Thursday, which will provide relief for more than 2,800 homeowners. It will give them 12.5 percent of what they paid for the lender-placed flood insurance.

Class Members were charged $4 million for the U.S. Bank force-placed insurance from American Security Insurance. The class action settlement totals $506,728.

The amount Class Members will receive will depend on how long their coverage was backdated. If the coverage was backdated for 120 days or more, they “will receive additional compensation.” If it was backdated 90 to 180 days, they will receive $50. If it was backdated 181 to 365 days, they will receive $75. And if backdated more than a year, they will be paid $100, according to the U.S. Bank class action settlement.

Class Members will not have to file a claim to receive the checks; they will be sent the checks automatically.

“The amounts that are attributable to checks not cashed within 180 days will be redistributed to other class members who cashed their checks,” the U.S. Bank force-placed insurance class action settlement says.

In addition, for a three year period U.S. Bank will not accept commissions, reimbursements, payments or compensation from force-placed insurance on a closed-end mortgage loan that is secured by a Frannie Mae/Freddie Mac, except for payments on claims. And American Insurance will not pay lender-placed insurance payments “on property owned by any Class Members.”

During the three year period, “U.S. Bank will provide the [required] notice . . . to Class Members at least 45 days before charging them for” force-placed insurance.

Judge Beeler said that the proposed class action “settlement appears to treat all class members fairly.

“It provides for a flat refund, and all class members will receive the same prospective relief,” she wrote. “The relief compares favorably to other lender-placed insurance settlements that have been approved by courts.”

In 2014, Judge Beeler certified several multistate classes of borrowers covering 40 states, in which class members were charging U.S. Bank and American Security with breach of mortgage agreement, unjust enrichment, unfair business practices and bad faith.

Plaintiffs in the U.S. Bank force-placed class action lawsuit alleged that when the lender bought force-placed insurance for borrowers that it received kickbacks from American Security Insurance for the insurance it purchased.

In addition, U.S. Bank allegedly purchased flood insurance that was backdated, which borrowers were charged for when their own homeowners insurance expired. The Class Members were apparently charged for the backdated insurance even if no damage occurred to the property during the backdated period.

This backdated coverage did not line up with any notices that the Class Members were allegedly sent explaining that there had been a lapse in their coverage, the class action lawsuit said.

The borrowers allege in their force-placed insurance class action lawsuit that there had been collusion between U.S. Bank and American Insurance, which resulted in extra income for the bank, and the borrowers paid inflated prices for the homeowners insurance.

The plaintiffs are represented by Matthew C. Helland, Rebekah L. Bailey, E. Michelle Drake, Kai H. Richter and Megan D. Yelle of Nichols Kaster PLLP.

The U.S. Bank Force-Placed Insurance Class Action Lawsuit is Steven Ellsworth, et al. v. U.S. Bank NA, et al., Case No. 12-cv-02506, in the U.S. District Court for the Northern District of California.