Antitrust Law Daily Wrap Up, RICO—S.D. Fla.: $76M settlement approved in Nationstar force-placed insurance suit, (Nov 10, 2015)

By Greg Hammond, J.D.

The federal district court in Miami has granted final approval of a settlement that will make over $76 million available to a class of Nationstar Mortgage borrowers. The settlement resolves claims that Nationstar Mortgage, LLC’s purported forced-placed insurance practices violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and the Florida Deceptive and Unfair Trade Practices Act (Braynen v. Nationstar Mortgage, LLC, November 9, 2015, Goodman, J.).

Force-placed insurance occurs 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 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 settlement provides over $76 million in monetary relief to an over 380,000-member class, consisting of all borrowers in the United States who, within the Class Period—from January 1, 2008, through January 30, 2015—were charged by the Nationstar defendants under a hazard, flood, flood gap, or wind-only force-placed insurance policy for residential property, and who, within the Class Period, either (a) paid to the Nationstar defendants the net premium for that force-placed insurance policy or (b) did not pay to and still owe the Nationstar defendants the net premium for that force-placed insurance policy. In addition, the settlement provides injunctive relief that would prohibit the controversial force-placed insurance practices that are the subject of the lawsuit.

In granting final approval of the settlement and certifying a settlement class, the court deemed the terms of the settlement fair, reasonable, and adequate, and in the best interests of each of the parties and settlement class members. The court also overruled three objections because one of the objectors was not a class member, and the other two objections merely reflected a generic desire to receive more money or a better result, which is not a proper objection. Lastly, the court granted attorney fees and expenses in the amount of $5 million and case contribution awards in the amount of $5,000 to each named plaintiff.

The case is No. 1:14-cv-20726-JG.

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. Alan Graham Greer (Richman Greer, P.A.) and Erik Kemp (Severson & Werson) for Nationstar Mortgage, LLC, Harwood Service Co., LLC and Nationstar Mortgage Holdings Inc.

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

Cases: RICO StateUnfairTradePractices FloridaNews