New York, NY: A nationwide class action alleging that Citibank and MidFirst Bank improperly force-place high-premium flood insurance policies on homeowners across the United States can proceed. The ruling was made on January 2, 2013, by Judge David N. Hurd of the United States District Court for the Northern District of New York. The ruling permits all of the plaintiffs' claims to proceed.
In their Complaint, plaintiffs Gordon Casey and Duane Skinner allege that Citibank and MidFirst Bank have a policy and practice of force-placing unnecessary flood insurance coverage above the amounts required by their borrowers' mortgage contracts and by federal law. Citibank, MidFirst Bank and their affiliates asked the Court to dismiss the case, asserting that the borrowers' mortgage contracts permit them to force-place high premium flood insurance coverage in amounts the banks deem necessary. However, the Court denied the defendants' motions to dismiss and decided that the plaintiffs' claims alleging breach of contract, unjust enrichment, breach of fiduciary duty, conversion, violation of the Truth in Lending Act, and violation of the New York Deceptive Practices Act can proceed.
"With respect to borrowers who live in federally designated flood zones, Citibank, MidFirst Bank, and other banks engaged in the loan servicing industry have engaged in a classic bait-and-switch, in which borrowers are informed of one set of flood insurance requirements at closing and then, later, the banks demand additional, unwarranted flood insurance coverage,"said Shanon Carson of Berger & Montague, P.C., one of the lead attorneys for the plaintiffs.
Through this scheme, Citibank and MidFirst Bank have harmed thousands of borrowers by force-placing unnecessary flood insurance at extraordinarily high prices, which often results in unwarranted fees and other charges. In addition, each time the banks require such insurance, they receive lucrative financial benefits from the insurance companies who place the flood insurance policies.
All US borrowers with mortgages serviced by Citibank and MidFirst Bank who have been forced to purchase flood insurance policies may be affected by the Court' decision.