A class-action lawsuit filed against U.S. Bank on Thursday alleged the bank abused its right to force borrowers to purchase insurance on some of its mortgage loans.
Jacqueline Barnard, Dennis Sherman and Stacey Payton filed the lawsuit against U.S. Bank; Assurant, Inc.; Voyager Indemnity Insurance Company; and American Security Insurance Company alleging they were charged for forced-placed insurance (FPI), wind insurance and flood insurance.
Lenders are allowed to use FPI when the loan isn't insured by the borrower; however, the lawsuit alleged the bank abused that right by charging borrowers for expired coverage, purchasing backdated, retroactive FPI policies on behalf of borrowers and arranging for kickbacks in connection with the FPI.
All three plaintiffs had mortgages through U.S. Bank, and all three were required to purchase some form of insurance through U.S. Bank.
Barnard said she received a letter in September 2012 from Assurant that said she didn't have sufficient hazard insurance coverage. The letter said the insurance cost $1,274 and was charged to her through an escrow account for her mortgage. The coverage was backdated approximately three months, according to the lawsuit.
Sherman said he received a letter in October 2012 stating his insurance didn't include coverage for wind and required him to get coverage that was retroactive more than seven months.
Sherman attempted to contact U.S. Bank to inform the lender he couldn't find a company that would offer retroactive wind insurance, but he did get coverage starting in December 2012. The lawsuit alleged U.S. Bank charged Sherman $3,081 for the coverage between May and December.
Payton received a letter in March 2012 stating her insurance did not cover floods. The lawsuit alleged she was charged approximately $759 for coverage that was backdated more than two months.
The lawsuit seeks class status for borrowers who received mortgages through U.S. Bank and were required to purchase hazard, wind or flood insurance.
The plaintiffs are represented by Michael J. Boyle, Jr., of Meyer Wilson; Kai Richter and Megan Yelle, of Nichols Kaster, PLLP; and Shanon J. Carson, of Berger & Montague, P.C.
United States District Court for the Southern District of Ohio Western Division case number 1:15-cv-00008.