BofA Force-Placed Insurance Class Action Lawsuit Denied

A federal judge in California said Monday that a lawsuit filed against Bank of America NA over the bank’s force-placed insurance practices failed to meet the commonality and predominance requirements needed to be certified as a class action lawsuit.

Christopher Gustafson and the three other plaintiffs’ main argument in the proposed class action lawsuit was that Bank of America had used “‘force place hazard insurance coverage under mortgage loans to further impose unauthorized and excessive charges on Class Members.'”

Force-place insurance policies allow a lender to charge a borrower insurance fees if the homeowner allows his or her property insurance to lapse. Numerous class action lawsuits have been filed recently over the controversial practice, including one against Wells Fargo in September. In October, a federal judge preliminarily approved a $300 million class action settlement against Chase Bank over its force-placed insurance practices.

The Bank of America force-placed insurance lawsuit was filed in June 2011. It alleged that the force-placed insurance activities of the bank were “unlawful, abusive and unfair.”

U.S. District Judge Josephine Staton said that the proposed class action lawsuit did not meet what is required by Rule 23 of the Federal Rules of Civil Procedure, and that is why she did not grant the plaintiffs’ motion to give the lawsuit class certification.

Under Rule 23, “‘commonality requires the plaintiff to demonstrate that the class members have suffered the same injury.'”

“Plaintiffs enumerate a number of questions that they believe are common to all Class Members,” Staton wrote in his Nov. 4 decision. “But while plaintiffs may abstractly list a number of questions and facts that are ‘common’ to putative class members, they fail to show how these facts and question meet the commonality of predominance requirements in the context of their claims.”

Staton also said that there was a statute of limitations issue for the court because the different states involved with the case all have different rules and the court would have had to apply different rules to several circumstances, another problem that contributed to why she rejected the class certification.

The class action lawsuit alleged that Bank of America and BAC Home Loan Services LP, one of its mortgage units, forced borrowers into policies the plaintiffs argued were overpriced and unnecessary with a favored insurance company, in exchange for fees or commissions, going as far to backdate policies and charge for coverage retroactively.

In Bank of America’s argument against class certification, it said that the plaintiffs knew after surviving a motion to dismiss, that many of the charges “simply are not true,” based on discoveries made in the investigation process. The bank also explained that the plaintiffs continued to ask the judge to grant class certification based on a previously disclaimed argument that the force-placed insurance premiums were unreasonably high.

The class action lawsuit also went after Balboa Insurance Co., the insurer in question. Gustafson claimed that his premium went up from $614 per month to $1,045 when he was switched to Balboa after falling behind on the payments with his previous company. And, Gustafson said that the Balboa insurance policy provided less coverage than the cheaper plan.

The plaintiffs are represented by Edward W. Ciolko, Peter A. Muhic and Donna Siegal Moffa of Kessler Topaz Meltzer & Check LLP and E. Michelle Drake of Nichols Kaster PLLP.

The Bank of America Force Placed Insurance Class Action Lawsuit is Christopher Gustafson, et al. v. BAC Home Loans Servicing, LP, et al., in U.S. District Court of the Central District of California.