Citibank, N.A., and CitiMortgage, Inc. (together, Citi), have agreed to settle a putative class action lawsuit over force-placed insurance (FPI). Under the settlement, members of the proposed settlement classes will be entitled to receive more than $110 million in refunds of FPI premiums that were charged to their accounts by Citi.
Specifically, settlement class members who were charged for force-placed hazard insurance will receive back 12.5% of their force-placed hazard insurance premiums upon submitting a claim, which represents over 83.3 percent of the allegedly unlawful commissions that Citi's affiliate received on force-placed hazard insurance (15% of the premium), from its force-placed insurance vendor.
Moreover, Citi has agreed to refund eight percent of the force-placed flood insurance premiums and 8% of the force-placed wind insurance premiums to settlement class members who submit claims, even though no commissions were paid to Citi or its affiliates on flood or wind insurance.
The settlement agreement also provides for injunctive relief. For example, the settlement forbids Citi and its affiliates from accepting commissions or any other form of compensation in connection with FPI for a period of six years, and also forbids Assurant, Inc., American Security Insurance Company, and Standard Guaranty Insurance Company (collectively, the Assurant Entities) from offering commissions or other compensation to Citi for the same period of time.
In addition, the settlement places limits on the amount of insurance coverage that Citi may require borrowers to maintain, and requires Citi to offer settlement class members the opportunity to reduce their flood insurance coverage if Citi increased their coverage requirement (post-origination) to an amount in excess of the amount required under federal law.
Further, the settlement requires Citi to attempt to renew a settlement class member's existing insurance coverage, upon request, in the event of a lapse in coverage, prior to purchasing any force-placed coverage.
The settlement agreement resolves all lender-placed insurance claims asserted against Citi in Casey v. Citibank, N.A. et al., No. 5:12-cv-820 (N.D.N.Y.) and Coonan v. Citibank, N.A. at al., No. 1:13-cv-353 (N.D.N.Y.), which have been consolidated in the U.S. District Court for the Northern District of New York.
In addition, the settlement resolves the lender-placed insurance claims asserted against Assurant in the Coonan action.
The settlement, however, does not resolve the claims in the Casey action against MidFirst Bank, N.A. d/b/a Midland Mortgage and FirstInsure, Inc.
The court will hold a hearing on the settlement agreement on March 14.
Originally published on FC&S Legal: The Insurance Coverage Law Information Center. FC&S Legal is the industry's ONLY single-source, comprehensive portal developed specifically for insurance coverage law professionals. To find out more, visit www.fcandslegal.com. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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