The most critical part of any class-action defense is often the narrative. That is because a judge who believes that consumers have been cheated will often permit a class action to go forward, even if the case is otherwise questionable. Nowhere is that tendency more evident than in the wave of lender-placed insurance (“LPI”) lawsuits currently sweeping the country.

Lenders purchase LPI, which is also called force-placed insurance, when a borrower fails to maintain hazard insurance on mortgaged property. The premiums are normally several times more than what a shopper would pay on the open market—a fact banks normally disclose. Lenders pass on LPI premiums to their borrowers. In the LPI lawsuits, the borrowers allege that the premiums they were charged were unlawfully inflated due to commissions and other perks paid back to lenders.

The facts of these cases often bias judges against lenders. For example, in one recent decision involving Homeward Residential, Inc., a borrower was charged $4,979 for a one-year policy, even though she later obtained similar coverage for $1,541—a 200% mark-up. By comparison, her lender received a 15% commission on all LPI premiums and got a $9.7 million signing bonus from the insurer, among other benefits. The presiding judge called this “reverse competition” because it amounts to a race to pay the most benefits to a lender, a process that increases LPI premiums.

Even though all of this is disclosed to borrowers—and is therefore agreed to—courts still allow these cases to proceed. What is missing is any response by the industry that explains how this is a legitimate process that does not gouge consumers. Until that narrative is found and offered, lenders and LPI insurers are likely to continue to lose these lawsuits.