HSBC to Settle Force-Placed Insurance Class Action Lawsuits

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Two status reports indicate that HSBC may be close to settling with plaintiffs in a pair of force-placed insurance class action lawsuits filed in federal court in New York and Colorado.

In each force-placed insurance class action lawsuit, the allegations are very similar. Plaintiffs allege that the company worked with insurers to place policies on properties when homeowners did not maintain flood, fire or other types of insurance pursuant to a mortgage agreement. However, a 2012 industry media article indicated that the relationships could be problematic.

Plaintiffs in a slew of class action lawsuit complaints allege that mortgage lenders like HSBC paid kickbacks to insurers in order to maintain an exclusive relationship. In return, those companies would create policies that were post-dated, or cover past gaps where no events affecting the property occurred. In addition, the rates negotiated often reported were far higher than policies a homeowner might choose for themselves. Even the National Association of Insurance Commissioners had argued that policies “should not be backdated to collect premiums for a time period that has already passed.”

In both cases, the parties have been negotiating a settlement that the New York plaintiffs say “would resolve both this action and a separate putative class action regarding [force-placed] insurance” in Colorado. However, the New York status report also goes into more detail regarding an interlocutory appeal in the case of Rothstein v. Balboa Insurance Co. pending before the 2nd U.S. Circuit Court of Appeals.

Other lenders have already settled with plaintiffs for hundreds of millions of dollars to resolve similar allegations in recent months and the overwhelming majority also include injunctive relief. According to the terms of some of these class action lawsuit settlements, lenders will not purchase back-dated coverage when no events have occurred and will not engage in agreements with past insurance agents.

More information about the proposed HSBC force-placed insurance class action settlement was not immediately available. Keep checking TopClassActions.com or sign up for our free newsletter for the latest updates. You can also mark this article as a “Favorite” using your free Top Class Actions account to receive notifications when this article is updated.

The plaintiffs in New York are represented by Berger & Montague PC, Holland Law Firm, Cates Mahoney LLC and Levin Fishbein Sedran & Berman. Kessler Topax Melzer & Check LLP represents the Colorado plaintiffs.

The New York Force-Placed Insurance Class Action Lawsuit is Hoover, et al. v. HSBC Mortgage Corp. (USA), et al., Case No. 3:13-cv-00149, in the U.S. District Court for the Northern District of New York. The Colorado Force-Placed Insurance Class Action Lawsuit is Weller, et al. v. HSBC Mortgage Services, Inc., Case No. 1:13-cv-00185, in the U.S. District Court for the District of Colorado.