DOJ files lawsuit against insurer for forcing policies on already-insured borrowers

Insurance lawsuit overview:

• Who: The U.S. Department of Justice filed an insurance lawsuit against National General Insurance and related entities.
• Why: National General allegedly improperly forced insurance policies on borrowers with already existing auto insurance coverage.
• Where: The National General insurance lawsuit was filed in Pennsylvania federal court.

The U.S. Department of Justice is suing National General Insurance and related entities over claims they forcibly placed additional insurance policies on borrowers with existing policies.

The insurance lawsuit asserts National General engaged in a scheme to defraud consumers who financed their vehicles through Wells Fargo Bank NA between Oct. 1, 2005, and Sept. 30, 2016.

National General allegedly forced its Collateral Protection Insurance (CPI) insurance policies on millions of vehicles even when it knew borrowers had existing coverage through other insurers.

“In fact, from 2008 to 2016, National General knew that it falsely force-placed insurance between 56 and 93% of the time,” the insurance lawsuit says.

These insurance policies caused the affected consumers to pay money they did not owe. In some cases, borrowers defaulted on their loans, resulting in their vehicles being repossessed and negatively impacting their credit scores.

Insurance lawsuit: National General earned at least $500M through forced CPI placement

The DOJ alleges Wells Fargo contracted with National General since at least 2005 to determine whether a borrower had auto insurance. If National General did not obtain proof the borrower was insured, it would automatically force its CPI product on the loan, adding the cost of the CPI to the borrower’s loan.

These insurance policies averaged about $1,100 per loan annually, according to the insurance lawsuit, and were more expensive than policies borrowers could obtain on the open market.

More than 640,000 borrowers were charged for force-placed insurance policies, causing National General to earn more than $500 million in premiums and other fees associated with the CPI placements, the DOJ alleges.

“National General knew or at least recklessly disregarded that it was falsely placing PCI and charging for duplicative insurance, but it took no meaningful steps to reduce the rate of false placements,” the insurance lawsuit says.

The DOJ seeks to recover penalties under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 in connection with the allegedly improperly force-placed insurance policies.

Geico was recently hit with a separate insurance lawsuit claiming it underpays policyholders for total loss vehicles.

Did National General force-place insurance policies on your auto loan? Tell us about your experience in the comments.

The United States is represented by Brian Boynton, Jamie Ann Yavelberg, Allison Cendali, Lindsay Defrancesco, Laura E. Hill, Eric G. Olshan and Adam Fischer of the United States Department of Justice.

The insurance policies lawsuit is United States of America v. National General Holdings Corp., et al., Case No. 2:24-cv-01063, in the U.S. District Court for the Western District of Pennsylvania.

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