Forced place flood insurance class action against Bank of America can proceed

Posted on: August 3rd, 2012 by Steve Larson
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On July 11, 2012, Judge Michael Simon of the United States District Court for the District of Oregon issued a ruling that permitted the plaintiffs’ breach of contract claims to proceed in a nationwide class action alleging that Bank of America improperly force-placed high-premium flood insurance policies on homeowners across the United States.

In their complaint, plaintiffs Ronda and Larry Arnett allege that Bank of America has a practice of force-placing flood insurance coverage above the amounts required by borrowers’ mortgage contracts and by federal law.  Bank of America asked the Court to dismiss the case, asserting that its mortgage contracts with borrowers permit it to force-place high premium flood insurance coverage in any amounts that it deems necessary.  The Court denied Bank of America’s motion to dismiss and decided that Plaintiffs’ claims alleging breach of contract and conversion of funds should proceed to trial.

“When it comes to flood insurance, Bank of America and other companies in the mortgage servicing industry have engaged in a classic bait-and-switch, in which borrowers are informed of one set of flood insurance requirements at closing and then, later, Bank of America demands additional, unwarranted flood insurance coverage,” said Shannon Carson of Berger & Montague, P.C., one of the lead attorneys for the Plaintiffs.  “Through this scheme, Bank of America has harmed tens of thousands of consumers by force-placing excessive and unnecessary flood insurance at extraordinarily high prices.  Moreover, each time Bank of America force-places flood insurance policies on its borrowers it receives a kickback from the flood insurance companies with whom Bank of America has an exclusive relationship.”

A similar case, brought on behalf of Bank of America borrowers with home equity lines of credit (“HELOCs”), that also alleges abuses in the force-placement of flood insurance, has been brought by the same group of plaintiffs’ attorneys and is also pending before Judge Simon in the United States District Court for the District of Oregon.

The plaintiffs in this case, Arnett, et al. v. Bank of America, N.A., Civil Action No. 11-cv-1372 (D. Or.), are represented by the law firms of Berger & Montague, P.C., Taus Cebulash & Landau LLP, and Stoll Stoll Berne Lokting & Shlachter P.C.