The vast majority of California homeowners use some type of bank or lender to pay for their home. A typical bank or lender specifies exactly what type of hazard insurance you need and how much of it a homeowner is required to carry.

For instance, some banks or lenders may require California homeowners to have coverage to protect the home from fires, robberies, or other specific types of damage.

If a homeowner fails to always maintain the required amounts of insurance coverage, then the mortgage contract may give a lender the right to purchase the insurance you are missing.

Typically, this is referred to as lender-placed hazard insurance in California – and it can be very expensive.

When a homeowner lacks the home insurance required by mortgage terms (or if the coverage lapses), a mortgage lender can buy whatever type of lender-placed hazard insurance in California it chooses per the rules regarding force-placed insurance.

In these cases, the lender is not going to shop around to get the best deals for the homeowner – instead, the policy will be significantly more expensive than what an equivalent policy would cost on the marketplace.

In fact, lender-placed hazard insurance in California could have premiums up to 10 times greater than normal home insurance rates.

Lender-placed Hazard Insurance Wins

However, the force placed hazard insurance practices of some mortgage lending services have been called into question.  During the past few years, many homeowners have been bringing lawsuits against banks and lenders with positive outcomes.

According to some lender-placed hazard insurance lawsuits, sometimes mortgage servicers have exclusive agreements with insurance companies, in return for which the insurers give the servicers kickbacks.

In some cases, servicers even outsource their loan processing to the force placed insurer, which is quite prompt in providing lender placed hazard insurance for borrowers who fail to maintain home insurance policies.

In 2013, the first major settlement over lender-placed hazard insurance was reached, with Wells Fargo and QBE agreeing to pay $19 million to affected Florida homeowners over lender-placed hazard insurance practices.

These homeowners could file to receive refunds for 25 percent of the premiums they’d paid on force-placed hazard insurance policies.

Since then, other lender-placed hazard insurance settlements have been reached with homeowners across the nation.

In Sept. 2013, JP Morgan Chase and Assurant agreed to settle force-placed insurance claims for $300 million to nearly 780,000 homeowners.

Citigroup and Assurant also agreed to pay $110 million in a lender-placed hazard insurance settlement in Feb. 2014.

Were You Affected by Lender-Placed Hazard Insurance in California?

If your mortgage servicer issued a lender-placed hazard insurance in California on your home or property with excessive or unreasonable rates, you may be eligible to join a force placed class action lawsuit.

An experienced attorney can offer you a complimentary consultation and advise you if pursing legal action is the best course of action for you.