Federal court approves JP Morgan force-placed insurance class action settlement

Posted on: April 1st, 2014 by Steve Larson
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Consumer Law Cases 2A Florida federal judge granted final approval to JP Morgan Chase NA and Assurant, Inc.’s $300 million settlement of a class action accusing them of overcharging homeowners for force-placed policies to fund kickbacks.  Overruling objections to the settlement, U.S. District Judge Federico Moreno touted the deal as among the most favorable for plaintiffs in the recent wave of force-placed litigation against insurers and banks. In addition to the $300 million monetary settlement, the plaintiffs have obtained injunctive relief valued at more than $650 million by class counsel.

Courts across the country have come out on different sides in force-placed insurance litigation, but the plaintiffs faced several perils in pressing forward with the lawsuit, considering a recent Eleventh Circuit decision that nixed similar litigation against Wells Fargo Bank.

Judge Moreno overruled objections from some plaintiffs to the deal, including that it was unfair and unreasonable to require class members to submit claims forms before they could receive compensation.

The judge also concluded that the settlement, reached with the help of a mediator throughout the process, was negotiated at arm’s length and was not a result of collusion.

The deal, announced in September, was preliminarily approved by Judge Moreno in October. The judge preliminarily certified a nationwide settlement class of borrowers who were charged under Chase’s hazard lender-placed insurance policy for residential property.

Under the terms of the settlement, the defendants — including Chase, Assurant and several of its affiliates — will be required to provide class members with a 12.5 percent refund on their net annual premiums and to refrain from continuing their allegedly wrongful force-placement practices.

The Florida suit concerns requirements stipulated by Chase in its standard mortgage agreement obliging borrowers to maintain hazard and wind insurance on the property securing their loan.

The suit, launched in June 2012, does not dispute the bank’s right to place the insurance when properties are underinsured or uninsured, but instead accuses Chase and Assurant of conspiring to artificially inflate the premiums charged under those policies “well beyond the cost of coverage,” according to court documents.

According to the plaintiffs, the high cost of these policies stemmed from kickbacks that insurers paid lenders that provided their force-placed business. Those kickbacks included commissions and low-cost or free administrative services, as well as questionable reinsurance arrangements with bank affiliates.