Revival of Force Placed Insurance Cases Against Bank of America in First Circuit

Court of Appeals Says Plaintiff Properly Alleged Bank of America Acted in Bad Faith in Force Placed Insurance Class Action


Boston, MA (PRWEB) On September 21, 2012, the United States Court of Appeals for the First Circuit issued a pair of decisions upholding claims by borrowers in two class action lawsuits against Bank of America. For the Appeals Court’s decisions, click on links for Lass and Kolbe. The lawsuits allege that Bank of America breached its mortgage contracts and acted in bad faith by forcing borrowers to maintain excessive amounts of flood insurance, by purchasing backdated flood insurance policies at borrowers’ expense, and by purchasing such coverage through affiliated entities so that its affiliates could earn a kickback.

In these decisions, the Appeals Court struck down two earlier district court opinions that had dismissed the plaintiffs’ claims. In the first case, captioned Kolbe v. BAC Home Loans Servicing d/b/a Bank of America, N.A. (Case No. 11-2010), the Court upheld claims that Bank of America breached the terms of FHA mortgages and violated U.S. Housing and Urban Development (HUD) guidelines by requiring borrowers to carry flood insurance in excess of the amount they owed on their loans. The Court found “strong support” for these claims in the mortgage contract, and noted that the mission of the FHA loan program is to make home ownership “affordable.”

In the second case, captioned Lass v. Bank of America, N.A. (Case No. 11-2037), the Court upheld similar claims that Bank of America “demand[ed] more flood insurance than required by federal law or the mortgage agreement,” and also upheld claims that Bank of America “unjustifiably charged borrowers for backdated coverage and commissions[.]” In particular, the Court noted that the plaintiff’s allegations of improper kickbacks or so-called “commissions” in connection with force-placed flood insurance “easily meet the threshold for a viable claim.”

“We are thrilled with the Court’s decision and believe it vindicates each and every one of the claims we have asserted against Bank of America,” said attorney Kai Richter, who represents Plaintiff Susan Lass. “There are a lot of borrowers across the country really hurting right now, and it is not right for banks to add to their pain by engaging in these types of practices,” said Richter.

The Court’s decision could have broad implications for several other cases across the country, which involve not just Bank of America, but other major banks. Earlier this month, a federal district court in Pennsylvania reached a similar result in another case brought by Nichols Kaster against Wells Fargo, Morris v. Wells Fargo Bank, N.A., No. 2:11-cv-00474, 2012 WL 3929805 (W.D.Pa. Sept. 7, 2012). In total, Nichols Kaster is currently litigating more than a dozen force-placed flood insurance class actions against some of the nation’s largest banks, including JPMorgan Chase Bank, N.A., Wells Fargo, Citibank, U.S. Bank, and RBS Citizens, N.A., as well as Bank of America.


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