Consumers are winning class action lawsuits over force-placed homeowners insurance in California.

Force-placed insurance is a practice that has been making millions of dollars for insurance companies and for the banks.

Promoted as a consumer protection, force-placed homeowners insurance in California allows the bank that holds your mortgage to buy property insurance for you if your policy lapses due to non-payment.

That way, there is no lapse in coverage in case an unforeseen events damages your home.

This sounds like a great plan because homeowners don’t want to pay a mortgage on a home that is no longer safe to live in, nor do homeowners want to walk away from a mortgage. The bank doesn’t want to put you in that situation, either.

Consumer advocates, however, say problems abound with force-placed homeowners insurance in California.

Force-placed Homeowners Insurance in California: Protection or Scam?

When a bank purchases a homeowners policy on behalf of the mortgage holder, the policy can be as much as 10 times more expensive than what the homeowner could purchase on his own.

Both banks and companies that sell force-placed insurance insist this price discrepancy is because they must insure all homes; they are not able to assess the homes that are at the least risk of claims.

Force-placed homeowners insurance in California does not carry the same level of coverage as a standard policy, though. Most force-placed policies will not pay for lost possessions or the cost of staying somewhere else while a damaged home is fixed.

The biggest complaint regarding force-placed insurance is the allegations that banks receive kickbacks, often called commissions, from the insurance companies that sell force-placed insurance.

Regulatory oversight has diminished this practice, but the tradition has created an environment less than forgiving when a consumer misses an insurance payment.

Lawsuits Hold Banks Accountable

Homeowners have filed and won lawsuits against banks that have gouged them for force-placed homeowners insurance.

In 2015, Wells Fargo and insurance agency QBE agreed to pay up to $19 million to Florida homeowners who felt stuck with policies the bank made them purchase.

Their refunds could equal a quarter of the premiums they had paid. That was the first large settlement involving force-placed insurance.

Most recently, 780,000 homeowners won a $300 million settlement from J.P. Morgan and Assurant. Affected homeowners will receive a maximum refund of 12.5% of the force-placed premiums they paid.

In another case, Assurant had partnered with Citigroup and the two agreed to a $110 million settlement earlier this year.

Both settlements restrict the banks from accepting commissions on force-placed insurance for six years. However, both Citigroup and J.P. Morgan claim they already no longer accept such commissions as part of their policies.

If you or someone you know have been required to pay force-placed homeowners insurance in California, you could benefit from a class action lawsuit.