Antitrust Law Daily Wrap Up, RICO NEWS: $54M settlement reached in Nationstar force-placed insurance case, (Jun 2, 2015)

By Greg Hammond, J.D.

A class of mortgage loan borrowers has reached a $54 million settlement with lenders, servicers, and insurance companies that could resolve claims the defendants’ forced-placed insurance practices violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and the Florida Deceptive and Unfair Trade Practices Act. A motion for final approval of class action settlement was filed yesterday with the federal district court in Miami (Braynen v. Nationstar Mortgage, LLC, June 1, 2015).

Force-placed insurance is when a lender or servicer “force places” a new insurance policy on a property when a borrower fails to obtain or maintain proper hazard, flood, or wind insurance coverage on property that secures a loan. The lender then charges the premiums to the borrower. However, the class alleges that the mortgage lenders and servicers, such as Nationstar, have set up questionable and often illegal practices concerning force-placed insurance. Specifically, they allege that the defendant lenders and servicers entered into exclusive and collusive relationships with certain force-placed insurance providers, such as Assurant, Inc. and American Security Insurance Co., which resulted in exceptional profits to both the servicers or lenders and the force-placed insurers.

The complaint asserted two claims under RICO, alleging that the defendants had a common purpose of increasing and maximizing their revenues by forcing the class members to pay unreasonably high charges for force-placed insurance through a scheme that inflated the premium of cover kickbacks and expenses associated with monitoring Nationstar’s entire loan portfolio. In addition, the class alleged that Nationstar’s conduct of charging inflated amounts for their force-placed insurance violated the Florida Deceptive and Unfair Trade Practices Act. Other claims included breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, tortious interference with a business relationship, and breach of fiduciary duty

The proposed settlement, if approved, would provide more than $54 million in monetary relief to a 380,000-member class, along with injunctive relief that would prohibit the controversial force-placed insurance practices that are the subject of the lawsuit. The motion for final approval notes that the settlement will constitute 50 to 100 percent of the plaintiffs’ best-case scenario damages had the parties proceeded to trial. Further, the class argues that the settlement is an extraordinary result, given the complex issues against a “rising tide of adverse decisions from federal district and appellate court” decisions. Class counsel consequently seeks $5 million in fees and expenses, representing only 9.26 percent of the proposed monetary recovery to the class.

The case number is 14-cv-20726-Goodman.

Attorneys: Adam M. Moskowitz (Kozyak, Tropin, & Throckmorton LLP), Aaron S. Podhurst (Podhurst Orseck, P.A.), and Lance A. Harke (Harke Clasby & Bushman LLP) for settlement class.

Companies: Nationstar Mortgage, LLC; Harwood Service Co., LLC; Assurant, Inc.; American Security Insurance Co.; Voyager Security Insurance Co.; Standard Guaranty Insurance Co.

News: RICO StateUnfairTradePractices FloridaNews