In recent years, homeowners have been fighting back against big banks for a practice known as force-placed insurance.

Force-placed flood insurance in California is one such practice that has come under scrutiny recently.

Most large mortgage lenders engage in a practice called force-placed insurance. It is sometimes called lender-placed insurance.

Force-Placed Flood Insurance in California

How force-placed insurance works is this: The bank tells the homeowner that he or she must have a certain kind of insurance on the home if the bank will hold the mortgage. The homeowner purchases his or her own insurance policy.

But if the homeowner lapses in some way on his or her insurance payments or fails to pay the policy, the bank is entitled to place insurance of its own choosing on the property and stick the homeowner with the bill.

In the case of force-placed flood insurance in California, if a homeowner lives in a zone in which flood insurance is mandatory, he or she must take out flood insurance on the home.

If the homeowner fails to pay the policy payments, the lending bank can impose a force-placed flood insurance policy on the home and then bill the homeowner for that policy.

The problem with force-placed flood insurance in California and other lender-placed insurance is that the policies that the banks arrange are often at extremely high rates.

These rates can be multiple times more than a regular insurance policy a homeowner would buy.

Additionally, the lending banks often receive kickbacks in the form of fees, commissions and other compensations.

Force-placed flood insurance in California and other force-placed insurance policies many times provide duplicate or unnecessary coverage.

The lending institution and insurance carrier can backdate policies to collect insurance premiums for periods of time when the homeowner was not at risk for flood or other disasters.

Homeowners who have fought back against the lending institutions claims that the banks do this to increase their bottom line.

Premiums for force-placed flood insurance in California and other lender-placed insurance have are often shared between the bank and the insurance provider in a way that may provide unlawful kickbacks to the bank.

Homeowners Fight Back Against Force-Placed Policies

In recent years, homeowners have fought back against the big banks for this kind of unfair practice. In 2013, Florida homeowners won $19 million from Wells Fargo and QBE in the first major force-placed insurance class action lawsuit in the U.S.

Wells Fargo and QBE offered the homeowners a refund of 25% of the allegedly unlawfully paid premiums.

Later that year, J.P. Morgan and Assurant agreed to pay 780,000 homeowners a force-placed insurance settlement of $300 million.

Citigroup and Assurant paid $110 million in a similar class action lawsuit in 2014. These homeowners could claim 12.5% of the force-placed insurance premiums they paid.

These settlements also require the banks to stop taking commissions from the insurance companies for 6 years.

Many banks claim that they stopped the practice of receiving commissions for forced-place insurance insurance and have not done so for years.

Filing a Forced-Place Insurance Class Action Lawsuit

If you believe you were forced to pay for an over-priced, unnecessary or otherwise excessive force-placed flood insurance in California, you may be able to file a claim to recover monetary damages or you may be eligible to join a class action lawsuit investigation and seek compensation for the improper charges you paid.