BB&T, ASIC Hit With Insurance Kickback Class Action Lawsuit

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Last week, American Security Insurance Co. and Branch Banking & Trust were hit with a class action lawsuit in Florida federal court accusing the companies of working in concert to inflate insurance premiums for mortgage holders.

Lead plaintiffs, two Florida homeowners, allege in their class action lawsuit that Branch Banking took kickbacks from American Security Insurance to force mortgage holders to automatically enroll in more expensive insurance. The plaintiffs allege in their class action lawsuit that homeowners who didn’t purchase their own insurance were automatically enrolled in American Security Insurance Co. by Branch Banking.

“Plaintiffs here do not challenge [Branch Banking’s] right to force place insurance in the first instance,” the class action lawsuit says. “They challenge defendants’ manipulation of the force-placed insurance market with an eye toward artificially inflating premiums and placing unnecessary coverage, which [Branch Banking] purchases from the [American Security Insurance Co.] and then chooses to pass on to the borrower.”

The force-placed insurance class action lawsuit argues that Branch Banking makes a lot of money under their agreement with American Insurance at the expense of homeowners because borrowers pay an inflated premium, which the Branch Banking gets to keep in part. Additionally, the class action lawsuit alleges that the kickbacks would be hidden as “expense reimbursements” or “commissions” by the companies. “The money paid back to [Branch Banking] and its affiliates is not given in exchange for any services provided by them; it is simply grease paid to keep the force-placed machine moving,” the plaintiffs allege in their force-placed insurance class action lawsuit.

As more class action lawsuits target force-placed insurance, the plaintiffs admit that the companies have curtailed the scheme. The plaintiffs argue that the companies still owe homeowners compensation for their financial losses and should be legally banned from restarting.

“The small percentage of borrowers who are charged for force-placed insurance shoulder the costs of monitoring [Branch Banking’s] entire loan portfolio, effectively resulting in a kickback,” say the plaintiffs in their class action lawsuit.

According to the force-placed insurance class action lawsuit, total damages to homeowners under the scheme exceeds $5 billion. The plaintiffs seek to represent a nationwide Class of more than 1,000 members.

Eighteen other class action lawsuits regarding force-placed insurance have been filed with the U.S. District Court for the Southern District of Florida. Nine of these actions have led to nationwide settlements including a $228 million settlement with Bank of America NA and BAC Home Loans Servicing; a $140 million settlement with Ocwen Financial Corp. and Assurant; and a $300 million settlement with JPMorgan Chase NA and Assurant. Assurant and QBE/Balboa controlled 99.7 percent of the forced-placed insurance market, the Center for Economic Justice said in 2012.

The plaintiffs are represented by Adam M. Moskowitz, Tucker A. Ronzetti, Rachel Sullivan and Robert J. Neary of Kozyak Tropin Throckmorton LLP, Aaron S. Podhurst and Peter Prieto of Podhurst Orseck PA, Lance A. Harke, Sarah Engel and Howard M. Bushman of Harke Clasby & Bushman LLP and Daniel C. Girard and Elizabeth A. Kramer of Girard Gibbs LLP.

The BB&T Insurance Kickback Class Action Lawsuit is Beber, et al. v. Branch Banking & Trust Co., et al., Case No. 1:15-cv-23294, in the U.S. District Court for the Southern District of Florida.

UPDATE: The BB&T, ASIC force-placed insurance class action settlement is now open. Click here to file a claim.