On August 11, 2017, Attorney General Maura Healey announced that American Security Insurance Company (“American Security”), a subsidiary of Assurant, sent payments last week to over 4,500 homeowners improperly charged over $6.3 million for property insurance.
The refunds were paid under a November 23, 2015 Assurance of Discontinuance (“Assurance”) signed by American Security with the Attorney General and approved by the Superior Court. See Agency Checklists article of December 8, 2015, “Restitution For Thousands Of Mass. Homeowners Overcharged For Force-Placed Insurance.”
Refund of improper forced-placed premiums per court-approved Assurance
The Assurance resulted from the Attorney General’s investigation into American Security’s forced placement of hazard insurance for mortgage lenders and mortgage service companies.
Force-placed insurance is lender purchased insurance placed on mortgaged homes if the homeowner does not provide evidence of insurance as required by the mortgage documents. American Security was one of the largest writers of forced-placed insurance in the country.
The Attorney General’s investigation found that on occasion American Security’s forced-placed insurance duplicated voluntary coverage when the homeowner or their insurers failed to provide American Security with evidence of voluntary coverage. On other occasions the Attorney General found, American Security received the evidence of insurance but erroneously forced-placed coverage because of its failure to properly file the information. Finally, the Attorney General found that American Security had also force-placed coverage at incorrect rates when a lender or mortgage service company misidentified to American Security a residential property with between one and four units as a commercial property.
Audit mandated by Assurance finds 4,500 homeowners due $6.3 million
In announcing the payments, Attorney General Maura Healey said, “Our investigation found that this insurance company was charging consumers for costly and duplicative coverage.”
To arrive at the amount that American Security owed to Massachusetts homeowners for improper premiums or duplicative coverage, the Attorney General audited all American Security’s policies issued to Massachusetts homeowners from January 1, 2008 through November 23, 2015, the date of the Assurance,
After American Security’s agreement to the audit’s results, Attorney General Healey said. “As a result of our audit, 4,500 homeowners will be getting a check in the mail after being forced to pay for products they did not need.”
The average settlement payment for affected homeowners reported by the Attorney General’s Office was $1,400.
In announcing the refunds, the Attorney General’s Office noted that American Security had cooperated fully with the audit required by the 2015 Assurance filed in Suffolk Superior Court.
Besides making the $6.3 million in refunds, American Security previously paid the Attorney General’s Office $565,000, “for administering the terms of the Assurance, monitoring American Security’s compliance with the terms of the Assurance, and supporting the Attorney General’s Office’s investigation and remediation of unfair insurance and mortgage-servicing practices.”
American Security prior payment for similar practices in New York
The Massachusetts Attorney General’s settlement with American Security over forced-placed insurance was not American Security’s first brush with the law. In 2011, the New York Department of Financial Services obtained by consent orders against American Security and another subsidiary of Assurant, for $14 million. The consent decree also provided restitution to affected borrowers and barred American Security from paying commissions or entering into reinsurance arrangements with mortgage servicers and prohibited American Security from offsetting the $14 million fine from any insurance.
Abuses in forced-placed homeowner insurance targeted by Attorney General since 2015
Attorney General Maura Healey has taken a lead nationally on force-placed insurance abuses.
In February 2016, the Attorney General’s Office entered into a $4 million settlement with HSBC, a national bank, to resolve allegations that HSBC had accepted kickbacks relating to force-placed insurance. See Agency Checklists’ article of “HSBC to Refund Mass. Homeowners & Commonwealth $4 Million.”
In September 2016, the Attorney General’s Office settled with the force-placed insurance provider, QBE Insurance, regarding duplicative coverage and force-placed insurance overcharges. See Agency Checklists’ article of September 9, 2016, “More Homeowners To Get Refunds For Improper Force-Placed Insurance Policies.”
In April 2017, Attorney General sued Ocwen, one of the nation’s largest mortgage servicers, for for violating Massachusetts law by charging Massachusetts homeowners for unnecessary and expensive force-placed insurance policies, imposing excessive fees on delinquent borrowers, and failing to properly process escrow and insurance payments.
Members of the Attorney General’s Office involved in returning premiums to homeowners
This case was handled by Assistant Attorney General Tim Hoitink, Investigations Supervisor Arwen Thoman, Mathematician Burt Feinberg, Legal Analyst David Lim, and Division Chief Glenn Kaplan, all of Attorney General Healey’s Insurance and Financial Services Division.
