A new lawsuit filed on Sept. 4 in Miami federal court is putting Zurich American Insurance Company and two lender service firms under the microscope for their handling of forced-placed builder’s risk insurance on a South Florida property.
According to the complaint, Marat Gokhberg and Steve Ostrovsky say they were hit with a hefty $54,987.66 bill for builder’s risk insurance after their original policy lapsed on a Miami Beach property. The lender’s servicer, ELS Holdings LLC, allegedly arranged for Zurich to provide the coverage, but the plaintiffs claim the premium was excessive and not in line with market rates. They also allege that Zurich and ELS failed to give proper notice or justification for the charges.
The dispute didn’t stop at the insurance bill. Gokhberg and Ostrovsky allege that when they tried to refinance the property, Zurich and ELS refused to cancel the forced-placed policy – even after the plaintiffs secured a replacement policy. This, they say, led to a cascade of problems: construction delays, mounting interest, and a halt in project progress. The complaint says the forced coverage and subsequent lender actions left them facing liens, penalties, and additional financial headaches.
The lawsuit, filed in the US District Court for the Southern District of Florida, lists several claims: violations of the Real Estate Settlement Procedures Act (RESPA), breach of contract, bad faith, unfair trade practices under Florida law, negligence, unjust enrichment, and a call for the court to rescind the insurance arrangement altogether. The plaintiffs are seeking more than $1.2 million in damages and want the court to bar Zurich and ELS from similar practices in the future.
One of the key points in the complaint is the handling of policy clauses. The plaintiffs point to Zurich’s own policy language, which they say prohibits non-renewal of wind coverage without the insured’s written consent. They argue that Zurich’s refusal to cancel the policy after they obtained new coverage was not only unfair but also contrary to the contract and Florida law.
The case also shines a light on the broader issue of forced-placed insurance in commercial real estate. Gokhberg and Ostrovsky claim that the insurance was not “bona fide” and that the process was opaque, with little explanation for how the premium was calculated or why the coverage was necessary. They argue that the lack of transparency and communication is a problem not just for them, but for anyone dealing with forced-placed insurance in the commercial market.
As of now, Zurich, ELS Holdings, and FCI Lender Services have not filed responses to the complaint. The outcome of this case could have ripple effects for how insurers and lenders handle forced-placed coverage, premium setting, and borrower communications in the builder’s risk segment.
For insurance professionals, this lawsuit is a reminder of the scrutiny that comes with forced-placed insurance and the importance of clear, fair, and well-documented practices. With regulatory compliance and customer trust on the line, the industry will be watching closely as the case unfolds.
