Wells Fargo settles auto insurance class action for $390 million

SANTA ANA -- Wells Fargo & Co. and National General Insurance will pay $390 million to settle multi-district litigation related to a decade-long scheme that saddled customers with unwanted auto insurance policies, ending nearly 18 months of negotiation with a veteran mediator.

Attorneys announced the agreement in a status conference Monday with U.S. District Judge Andrew J. Guilford of Santa Ana, who said it "looks like a very good settlement."

"You've all been highly professional with some difficult issues. You have worked hard to resolve it, and the court appreciates your work on this," Guilford said.

Plaintiffs' co-lead counsel Roland K. Tellis of Baron & Budd P.C. said one issue remains: damages from 2002 to 2005, a still-contested period not included in the settlement.

"Long story short, those claims will not be released through this settlement," Tellis told Guliford.

Tellis plans to file an amended complaint to "align the class period with the settlement period," leaving the 2002-05 period possibly subject to separate litigation.

Plaintiffs' co-lead counsel Aaron M. Sheanin of Robins Kaplan LLP told the Daily Journal Wells Fargo "wanted to hold up the whole thing until we reached a resolution" regarding the three-year period, but the settlement ensures class members from 2005 on "get compensated as soon as possible."

Sheanin said the class includes more than two million consumers.

Representing Wells Fargo, David C. Powell of McGuireWoods LLP said the '02-'05 period "is well, well, well outside the statute of limitations."

"'02 to '05 has been our hangup for the last couple months," Powell told Guilford. "This is our way to resolve that."

National General Insurance is represented by Corey Worcester of Quinn Emanuel Urquhart & Sullivan LLP.

The $390 million will be a common fund used to refund Wells Fargo customers for premiums, interest fees and other costs associated with the what plaintiff's lawyers described as a cross-company kickback scheme that reaped millions of dollars in profits while treating customers as "collateral damage."

The money doesn't include attorney fees, which have not yet been disclosed.

The New York Times publicly exposed the fraud in July 2017, reporting a leaked investigation from the management consulting firm Oliver Wyman that detailed how Wells Fargo charged roughly 800,000 consumers for unwanted insurance, leading to 274,000 delinquent accounts and 25,000 cars wrongly repossessed.

The Wyman report estimated the banking giant owed its customers $73 million, and Wells Fargo initially planned to pay $80 million. That increased to $130 million after the bank acknowledged the scheme had been in place since 2005, not 2012 as originally reported.

Still, plaintiffs' counsel balked, as did federal regulators, with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency fining Wells Fargo $1 billion last April for the auto insurance scheme as well as a mortgage fee swindle.

The $390 million settlement announced Monday followed six mediation sessions with Eric D. Green, a principal at Boston-based Resolutions LLC who has handled previous Wells Fargo matters.

"This has been hotly negotiated," Tellis told the Daily Journal. "When Wells first announced this, they suggested that the conduct only went back to 2012. We now have a settlement that goes back to 2005."

Attorneys plan to file a motion for preliminary approval of the settlement by May 23. Guilford scheduled a hearing for June 3.

The lawsuit named 14 plaintiffs and eight claims for a nationwide class: fraud by concealment, unjust enrichment, three violations of the Racketeer Influenced and Corrupt Organizations Act and single violations of the Bank Holding Company Act, Consumer Legal Remedies Act and California Unfair Competition Law. It also sought various state claims. In Re Wells Fargo Collateral Protection Insurance Litigation, 17-ML02797 (C.D. Cal., filed Oct. 18, 2017).