A lawsuit filed in federal court in Manhattan, and a judge’s recent ruling prompted by that suit, is further raising the financial stakes for insurance carriers who provided force-placed coverage for mortgage servicers during the housing bust and its aftermath.
The New York class action suit was filed against GMAC and its insurer, Balboa, now a unit of QBE.
First, U.S. District Court Judge Alison Nathan in the Southern District of New York, rejected efforts by GMAC and Balboa to bar Racketeer Influenced and Corrupt Organizations (RICO) Act claims in the lawsuit. The ruling means carriers and mortgage servicers could be subject to triple damages.
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