April 7 Bank of America and QBE Insurance Corp have agreed to pay $228 million to settle claims that they engaged in a kickback scheme inflating the cost of insurance that homeowners were forced to buy, according to a court filing.
The deal reached in Miami federal court is the latest of several multi-million-dollar settlements reached over "force-placed" insurance, which is coverage that lenders arrange to protect their interest in a property when a homeowner's insurance has lapsed.
Mortgage agreements do allow lenders to charge homeowners for the insurance, but lawsuits have accused banks of abusing that right by passing on to homeowners the costs of kickbacks they received from insurance providers.
Filed in 2012, the proposed class action against Bank of America and QBE Insurance Corp accused them of violating state and federal laws, including the U.S. Racketeer Influenced and Corrupt Organizations Act (RICO.) QBE Insurance Corp is part of Australia-based QBE Insurance Group Ltd..
The settlement was disclosed in a motion for preliminary approval filed by plaintiffs in the U.S. District Court for the Southern District of Florida on Thursday. Plaintiffs also asked the court to name law firms Kozyak Tropin & Throckmorton, Podhurst Orseck, and Harke Clasby & Bushman as class counsel.
"Bank of America believes that its lender-placed hazard insurance practices comply fully with state and federal law," bank spokesman Richard Simon said. "Nevertheless, in order to put an end to this litigation, we have reached a settlement that is acceptable to all parties.
A spokesman for QBE could not immediately be reached for comment.
"We are thankful to the defendants who decided to settle this matter to try and help their customers," Adam Moskowitz, a lawyer for the plaintiffs said.
The agreement is the latest of several reached between homeowners and major banks since September over force-placed insurance. Other settlements include $300 million with JPMorgan Chase, $110 million with Citibank and up to $32 million with HSBC Bank USA.
Wells Fargo Bank settled in March for an undisclosed sum.
The latest settlement covers Bank of America customers who were charged for force-placed insurance between January 2008 and February 2014.
"Each class member stands to recover hundreds, if not thousands, of dollars as a result of the settlement," lawyers for the plaintiffs said in Thursday's filing.
The case is: Cheryl Hall et al v Bank of America N.A. et al, U.S. District Court, Southern District of Florida, No 12-cv-22700 (Reporting by Dena Aubin in New York; Editing by Kevin Drawbaugh and Alden Bentley)