Wells Fargo and QBE have agreed to settle a lawsuit dealing with force-placed insurance policies in Florida involving 24,000 borrowers.

The companies will pay $19.3 million to compensate the borrowers.

The settlement in federal district court in Miami deals with claims that the bank and QBE overcharged homeowners in Florida for force-placed insurance. The class-action lawsuit is one of three filed in connection with alleged overcharging of homeowners for force-placed insurance, which became a huge business in the wake of the housing bust.

The two others were filed in New York, according to industry officials. Best estimates are that the business has $2.6 billion in annual written premiums.

In other action, the regulator of Fannie and Freddie has proposed a rule that would bar force-placed insurance underwriters from paying fees and commissions to banks who own or service home mortgages that are either delinquent or in foreclosure.

California and New York insurance regulators are also acting to bring down rates in those states, and New York has settled with Assurant and QBE recently on that issue.

Also, the Florida Insurance Department will hold a hearing Monday to discuss American Security Company’s proposal to keep average rates statewide at the same level now levied.

The proposed rate would become effective August 1, 2013 for any new and renewal business. The proposed rate change is not uniform and some areas of the state are subject to higher rates.

American Security is an admitted Florida insurer and has the largest market share of lender-placed policies with more than 142,000 representing a total premium of $508 million in the state, according to Kevin McCarty, state insurance commissioner.

In the lawsuit settlement, filed Monday, Wells Fargo and QBE agreed to repay borrowers who paid the premium 25 percent in cash. Those who were charged the premium but didn’t pay will get a credit of 25 percent off their bill. In addition, the defendants agreed to pay up to $5.48 million of the plaintiffs' attorney’s fees and costs.

The class-action lawsuit was filed in 2011 and certified in Feb. 2012.

The suit alleged that “Wells Fargo and QBE inflated these insurance premiums and profited from kickbacks and commissions from the force-placed insurance scheme.”

The lawsuit charged that Wells Fargo and QBE, the second-largest provider of force-placed insurance, had an exclusive agreement in which QBE searched the bank’s records for homeowners with lapsed policies.

After the lawsuit was filed, Wells Fargo said it would no longer purchase force-placed insurance from QBE in Florida.

In filing the lawsuit, Lance A. Harke of Harke Clasby & Bushman LLP, Miami, alleged that, “This scheme to inflate and profit from force-placed insurance is a clear violation of Florida law and affects our State’s most vulnerable and disadvantaged homeowners.”

Special Reports /

Wells Fargo, QBE Agree on $19.3M Force-Placed Settlement

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