Bank of America Force-Placed Flood Insurance Suit Can Proceed

In an extremely important decision, Judge Michael Simon of the United States District Court for the District of Oregon ruled that a nationwide class action lawsuit alleging that Bank of America illegally force-placed flood insurance could continue. BoA is alleged to have purchased high-premium flood insurance policies that exceeded the amounts required by homeowners’ mortgage contracts and by federal law. The lawsuit alleges breach of contract and conversion of funds. The decision to allow this case to proceed is a major win for homeowners, as many other banks have been accused of engaging in similar practices.

The lawsuit alleges breach of contract and conversion of funds.

There are multiple problems with the widespread use of force-placed insurance policies. First, many customers do not need the coverage that is purchased by the bank. FEMA and mortgage contracts set a necessary limit, but Bank of America and other banks routinely buy coverage unnecessarily exceeding this. Second, the insurance policies that are force-placed are often at extremely high premiums, much more costly than a customer would pay if they purchased a policy directly. Third, banks are alleged to receive lucrative kickbacks, commissions, and other compensation from insurance companies through which they purchase the policy. This collusion is good for the banks and insurance companies, but has severely harmed at least tens of thousands of homeowners across the United States, according to reports.

To pay for these flood insurance policies with inflated premiums, Bank of America deducted from homeowners’ home equity account or added to their mortgage balance, according to the suit. This is an important ruling, because it gives the countless affected homeowners their day in court and because it is alleged that many other banks have engaged in similar practices. Lawsuits have pointed at Wells Fargo, Citizens Bank, Citibank, Washington Mutual (now owned by JP Morgan Chase), GMAC Mortgage, and US Bank for other improper lending and insurance policy practices.

Have you had flood insurance or any other insurance force-placed on you by a lender? Were these costs prohibitively expensive or policies excessive in their coverage scope? If so, your bank may have illegally force-placed insurance, and you may have legal recourse through a class action lawsuit. To find out of you may be eligible to participate in a class action lawsuit against Bank of America or any other lender, do not hesitate to fill out the free case review form on the right. You may be entitled to financial remuneration for any damages incurred.