Porch Group Sues China Construction Bank, Alleging Reinsurance Fraud
Porch Group, a U.S. homeowners insurance and home inspection software company, reportedly sued China Construction Bank (CCB), alleging reinsurance fraud.
In its complaint, Porch alleged that the Chinese lender conspired with employees of Vesttoo, a now-bankrupt Israeli insurance firm, to issue fake reinsurance letters of credit, Reuters reported Friday (May 10).
CCB did not immediately reply to PYMNTS’ request for comment.
Porch said in its complaint that its business unit, Homeowners of America (HOA), had to pay out $80 million to cover insurance claims that should have been reinsured, that Porch provided $57 million to stabilize HOA and that Porch’s stock price fell after it emerged that some letters of credit behind Vesttoo’s reinsurance transactions were fake, per the report.
The company is seeking an unspecified amount of monetary damages with its lawsuit, the report said.
Vesttoo went into bankruptcy in the summer of 2023 while enmeshed in what has been reported as a “fake collateral scandal.”
During Porch’s most recent earnings call Wednesday (May 8), CEO, Chairman and founder Matt Ehrlichman said: “We continue to pursue parties in relation to Vesttoo-related claims. We mentioned previously that we had engaged a top-tier contingent-fee law firm, and we are vigorously enforcing our rights and pursuing damages.”
Together with homeowners insurance, Porch offers software-as-a-service (SaaS) products used by inspection, mortgage and title companies and says these products provide it with unique data for its homeowners insurance underwriting.
When Vesttoo filed for bankruptcy in U.S. court in August, the firm said it aimed to pursue legal action against those responsible for the scandal, Reuters reported at the time.
The company laid off staff, closed offices and appointed an interim CEO after the fraudulent letters of credit were discovered, according to the report.
“We believe the steps we are taking are best for Vesttoo’s long-term growth and success,” Ami Barlev, interim CEO of Vesttoo, said at the time in a statement, per the Reuters report. “Not only will they result in a strong, more sustainable capital structure, but they will provide us with the platform to aggressively pursue all parties that harmed our business.”
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