Homeowners have apparently had enough of force-placed insurance. One Florida homeowner in particular believes this is true, at least, because he has petitioned the court to certify his lawsuit as a class action. The defendants in the case are his lender and his homeowners insurance company. His complaint is rooted in a $10,000 insurance premium.
As we discussed in our last post, the North Palm Beach resident had inadvertently let his homeowners insurance lapse. The mortgage lender, whom he had done business with for years, purchased coverage for him. That coverage, called force-placed insurance, cost $10,000 for just a few months. The whole year would have cost the homeowner $18,000.
The homeowner has since taken his business elsewhere. He has also remedied his insurance coverage issue. But he knows there are thousands of homeowners in Florida and elsewhere who have had the same high-priced insurance sprung on them. He wants his money back, and he wants them to have their money back.
Adding fuel to his fire is the fact that his lender simply deducted the premium from his escrow account. He had planned to use that money to pay his property taxes. In a struggling economy and in a state hit hard by the foreclosure crisis, losing that much money could easily result in a homeowner defaulting on his mortgage or incurring so much debt he’d never get out from under it.
The homeowner’s bank, one of the nation’s largest, earned an 11 percent commission on this homeowner’s policy. Amid other complaints, the commission structure was dropped; but by then the bank had earned $177 million in commissions — “pure profit,” according to the complaint. There are only two companies that issue force-placed policies, and they have earned tidy sums from the business, too.
We’ll finish this up in our next post.
Source: The Palm Beach Post, “Lapsed home insurance policy leads to $10,000 premium for North Palm Beach man,” Adam Beasley, June 8, 2012Share