Equipment Lenders, Insurance Companies Accused of Inflating Force-Placed Insurance Premiums

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A Florida real estate business has filed suit against American Bankers Insurance Company of Florida, Avatel Technologies, Inc., The CIT Group Inc., and Assurant, Inc. over claims that the companies artificially inflated the cost of force-placed insurance on their leased equipment. The plaintiff says it leased telephone equipment from Avatel through CIT Group and was informed that if it did not provide its own proof of insurance, the company would be obligated to pay monthly premiums for the defendants’ force-placed insurance.

The suit argues that Avatel and CIT have entered into agreements with Assurant and American Bankers Insurance Company to provide an overarching “umbrella” insurance policy that covers all of Avatel’s/CIT’s customers. The case claims Assurant and American Bankers then provide a “kickback” and/or “lucrative reinsurance arrangements” to the other two defendants in exchange for their loyalty, the funds from which are then added to insurance premiums disguised as service fees charged to the plaintiff and proposed class members. As a result, the complaint alleges, the defendants charge consumers an excessive amount for their force-placed insurance policies without providing the “services” that purportedly justify the cost.

The suit claims the defendant’s scheme causes customers to pay premiums “up to ten times greater” than they would pay by procuring their own insurance, noting that the plaintiff pays $19.58 per month for “hyper-inflated insurance” and administrative costs it “did not agree to pay.”