Forced Place Insurance
Insurance companies, banks and financial institutions are being sued around the country by homeowners for force-placing flood and other insurance with excessive and outrageous premiums on their mortgage. Under the terms of the mortgage agreements, many homeowners are required to purchase and maintain flood insurance to protect the banks interest in the property. If a customer forgets to maintain the insurance, the banks force-place insurance, or arrange insurance, for the homeowner with an insurance company.
According to Bloomberg (May 6, 2012), the banks and mortgage service companies have undisclosed agreements with certain insurance companies to buy insurance if a homeowner's insurance coverage has lapsed. The banks collect the premiums from the homeowner or from their escrow account and forward the premiums to the insurance companies. Commissions are paid to the banks by the insurance companies for the business. Thus, banks have a huge incentive for customers to lapse coverage and force-place insurance. It is estimated that there was $5.5 billion of force-placed insurance in 2010. With these huge profits, some banks formed their own specialty insurance companies to provide force-placed insurance to its own mortgage customers. Thus, the bank was not only making commissions from the force-placed insurance but also the premiums which are outrageously inflated. Some force-placed insurance costs ten times more than coverage from a traditional insurer. Banks and insurance companies are rearing enormous profits from this blatant conflict of interest.
If you are a homeowner and a bank force-placed insurance, email or call Bohrer Brady LLC, at 1-800-876-3911 for a free initial consultation. One of our attorneys will discuss your situation with you.
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