I recently blogged about the issues regarding forced-placed insurance policies, how you can prevent them, and why insurance companies benefit from these types of policies. On August 6, 2015, U.S. District Judge Kenneth Marra denied a motion by Deutsche National Bank Trust and the American Home Mortgage Investment Trust (AHMSI) ruling that homeowners could pursue claims under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) and the Florida Consumer Collection Practices Act, as well as breach of mortgage agreement, breach of implied covenant of good faith and fair dealing, and unjust enrichment of loan servicer. The case, Martorella v. Deutsche Bank National Trust Company,1 is currently under appeal from the Southern District of Florida.
The homeowners, who are seeking class certification, are accusing Deutsch Bank and AHMSI of charging exorbitant rates for insurance forced on homeowners. AHMSI and Deutsche Bank would then receive a kickback from the insurance carriers for sending them business. To make matters worse in Martorella,
AHMSI, acting as an agent for Deutsche Bank, wrongly claimed that Martorella did not have insurance on her property and it purchased force-placed insurance through a specialty insurance carrier named Empire Indemnity Insurance Company. As a result, Martorella’s insurance premium increased nearly fourfold.2
As Judge Marra pointed out, “As a result, Defendants and their insurance carriers allegedly reaped huge profits from insurance policies which cost mortgagors many times the market rate for competitively priced insurance policies while providing significantly less insurance coverage.”3
Deutsche Bank and AHMSI are just the latest companies to be accused of colluding and charging excessive rates when purchasing force-placed insurance on behalf of insured. Typically, banks partner up with insurance companies who, in some circumstances, would send “kickbacks” to the mortgage company or bank for sending them all their force-placed insurance policies. Exorbitant force-placed insurance costs are passed on to the insured typically without the insured’s knowledge by way of increased mortgage rates or increased insurance premiums. In the case of Deutsche Bank, charges for force-placed insurance were two to four times those for conventional insurance, partly because they included the costs of unearned commissions paid to Homeward Residential by the insurance company. The lawsuit seeks damages for about 70,000 Florida homeowners and disgorgement of any money wrongfully obtained for force-placed insurance.
If you want to see if you are paying for force-placed insurance contact your insurance broker or your mortgage company to check for you. If you feel the price you are paying for your force-placed insurance is too expensive, ask your mortgage company to give you options for other types of insurance or do your own shopping for a cheaper rate. If they still don’t reduce your rates then consider contacting experienced counsel to discuss your claim. For other companies accused of this deceptive practice and other information regarding force-placed insurance see previous blogs from Merlin Law Group attorneys Phillip Sanov and Shaun Marker.
1 Martorella v. Deutsche Bank National Trust Co., No. 12-80372 (S.D. Fla. Aug. 6, 2015).
2 Martorella v. Deutsche Bank National Trust Co., 931 F.Supp.2d 1218, 1222 (S.D. Fla. Mar. 18, 2013).
3 Id. at 1221.