A class action lawsuit against JPMorgan
Chase over force-placed insurance practices has reportedly settled. The case is pending in Miami, Florida before Chief Judge Federico A. Moreno
of the United States District Court for the Southern District of Florida.
Although Chase entered into the settlement agreement in September 2013, the
final approval hearing before Judge Moreno is scheduled for February 14, 2014.
The settlement could
pay more than $300 million to about
750,000 mortgage borrowers. The plaintiffs have also entered into a
separate settlement for $4.75 million with Chase relating to forced-placed
insurance for policies covering wind damage. The $300 million settlement
relates to polices that cover fire and other risk.
The settlement does more than
extract money damages from the behemoth bank, it also achieved injunctive
relief. The national settlement prohibits the bank for six years
from getting commissions, kickbacks or reinsurance from the insurance, which it
obtains when a homeowner's policy lapses. This is known colloquially as “inflating
premiums”. The estimated value of injunctive relief from the bank changing
its practices is thought to be $690 million.
Class members
can file claims to recover part of the premiums they were charged between 2008
and Oct. 4, 2013.
Premiums for
force-placed insurance, which were deducted from a homeowner's escrow account
or added to the mortgage loan balance, were often much higher than the
homeowners' initial premiums. Many of those covered by the lawsuit lost their
homes to foreclosure.
Chase unsuccessfully sought to dismiss the lawsuit this past
May, claiming that the contracts granted the lender substantial discretion in
placing coverage and that the plaintiffs did not dispute that they breached
their mortgage agreements by failing to maintain continuous coverage.
From the period of 2008 to the present, the homeowners
alleged that Chase force-placed more than $2.3 billion in insurance coverage,
netting Chase approximately $600 million. The settlement requires that Chase
refund 12.5 percent of the annual premiums for forced-placed policies to all class-members,
and that it refrain from inflating premiums for six years.
This class action lawsuit against
Chase and Assurant is not the first large-scale litigation over forced-placed
insurance. Earlier this year, Wells Fargo and QBE Insurance Group
Ltd. announced that they agreed to settle a similar claim, also pending in
Miami before U.S. District Judge Robert Scola, for $19.3 million in favor of
30,000 borrowers.
Similar
settlements are expected to follow in lawsuits against some other
major banks.
