WHAT IS A CLASS ACTION LAWSUIT?
A class action, or class suit, is a unique kind of lawsuit in which a group of individuals collectively sue another party or parties based on similar claims. In this form of legal action, the lawsuit is filed on behalf of everyone in the class, that class being a group of people who share similar circumstances, injuries and damages. Although there are many plaintiffs, the affected class members agree to pursue legal action as a single unit in order to more efficiently seek compensation from the named defendant(s) and limit individual costs.
WHAT ARE THE BENEFITS OF A CLASS ACTION LAWSUIT?
Lower Litigation Costs
In a class action lawsuit, litigation costs are divided among all class members. The higher the number of class member plaintiffs, the lower the cost for each individual plaintiff.
Higher Probability of Recovery
Since class action lawsuits often involve a large number of plaintiffs (hundreds or even thousands in some cases), the sure number of participants gives the case validity in court, effectively establishing the case's innate merits. Given that class actions require approval and class member claims need to meet certain criteria to even be considered as part of the lawsuit, class actions are viewed as one of the most effective ways of eliciting a response or prompting a settlement from larger corporations, many of which disregard smaller lawsuits as part of normal business. In class action lawsuits, judgments against the defendant(s) ensure that plaintiffs will actually see the money they are awarded as damages are spread amongst all plaintiffs in the case.
More Experienced Legal Representation
Class actions are among the most complicated lawsuits to litigate, requiring a high level of legal expertise that includes a considerable investment of time and money from lawyers that decide to represent a class. Accordingly, class action lawsuits are typically handled by more experienced and knowledgeable attorneys that have gone through similar cases in the past. Furthermore, class actions permit courts to adjudicate the rights of parties who are not themselves before the court. In order to ensure that the rights of these unnamed parties are fully protected, the district court actively supervises many aspects of a class action. Among the most important of these supervisory duties is to select counsel with the ability and motivation to do the best job possible for the class.
Increased Opportunity to Litigate
Class action lawsuits give plaintiffs the opportunity to seek justice and relief for more moderate damages or relatively small claims. Due to lower litigation costs, class actions can cost-effectively seek relief for plaintiffs who would not have found it financially prudent to do so in a traditional lawsuit.
Better Judicial Efficiency
Because it aggregates multiple claims which would otherwise need to be litigated individually, class actions mitigate inconsistent verdicts and reduce strain on the judicial system by having all claims be resolved in a single proceeding through the efforts of the representative plaintiff(s) and appointed class counsel. This makes the legal process much more efficient, taking up less cumulative court time and involving fewer judges.
Greater Degree of Uniformity
Since only one decision by one judge, or one settlement, will be made in a class action lawsuit, plaintiffs' recoveries should be consistent. Moreover, class actions set precedent and help make clear how the defendant(s) and similar entities should operate in accordance with the law. Regardless of the outcome, defendants also benefit from class action lawsuits in that they can be assured of the resolution of numerous similar claims at the end of a trial or settlement.
WHAT IS FORCE-PLACED (LENDER-PLACED) INSURANCE?
Lender-placed insurance, also known as “force-placed” insurance is an insurance policy placed by a bank or mortgage servicer on a home when the homeowners’ voluntary insurance lapses or where the bank deems the homeowners’ insurance insufficient. Nearly all mortgages require borrowers to maintain adequate homeowners insurance on their property and flood insurance if the property is in a flood zone. If the borrower’s voluntary policy lapses and the borrower does not secure a replacement policy, most mortgages allow the lender to purchase insurance for the home and “force-place” it. The lender or servicer will then charge the borrower for the insurance it purchased.
WHAT ARE THE DISADVANTAGES OF FORCE-PLACED INSURANCE AND HOW CAN IT NEGATIVELY AFFECT CONSUMERS?
Typically, the lender-placed insurance premiums are significantly higher than the property insurance the borrower could have purchased on their own. In addition to being more expensive, the lender-placed insurance policy also has limited coverage. For example, these policies generally do not cover personal items or owner liability.
Concerns have been raised over the use of lender-placed insurance and the “reverse competition,” in the marketplace that tends to drive up premium prices to the consumers, as the lender is not motivated to select the lowest price for coverage since the cost is born by the borrower. Instead, the lender is motivated to purchase coverage from an exclusive insurer looking out for the lender’s interest rather than the borrower’s.