"FOUR BY FOUR" INSURANCE COVERAGE FOR NONDISCLOSURE LAWSUITS?

Four mortgage lenders have been sued in four class actions in 2 States, Georgia and Florida.  All four lawsuits present claims that these mortgage lenders failed to disclose that homeowners could protect themselves against extra interest charges by paying off their FHA-guaranteed loans either at the end or on the first of the month, and by using forms the FHA did not approve:

• Wells Fargo Home Mortgage
• U.S. Bank
• Suntrust Mortgage, and
• Bank of America.

"The net effect of the allegedly improper disclosures, the suits charge, is that large numbers of borrowers paid more in interest than they could have, and that the four banks collected substantial sums in post-payment interest illegally on FHA mortgages."  Kenneth R. Harney, "The Nation's Housing / Homeowners fight mortgage-interest overcharges" (Washington Post Syndicated Column, April 12, 2016).

Question:  Can these four lenders shift the liability for these lawsuits to insurance carriers?  If they can and do, what types of insurance policies could cover these claims?  If more traditional forms of insurance are not available to these four lenders, how much cover do they have in credit default swaps?

At one time, answers to these questions would certainly have been kept from the public.  For years now, however, Federal Rule of Civil Procedure 26 has required defendants to divulge their liability insurance coverage.  New questions arise now, though:

Will the plaintiffs and their lawyers in these cases stipulate to the secrecy these lenders covet, rather than face the potentially overwhelming onslaught of the lenders' lawyers if they do not stipulate to secrecy, and

Will the Courts in these cases allow these four lenders to shield their liability insurance policies and other information from public view other than by the lawyers and perhaps the parties?

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.