JPMorgan Chase Bank NA has agreed to pay $22.1 million to settle several class action lawsuits that accuse financial firm of force-placing expensive flood insurance on homeowners whose mortgages were serviced by the bank.
The plaintiffs filed a motion seeking preliminary approval of the class action settlement on Tuesday. “Class counsel have concluded that the settlement is fair, reasonable, adequate, and in the best interest of plaintiffs and settlement class members,” the motion says.
If approved, the class action settlement would resolve three separate class action lawsuits filed in New York and California in 2012, which accuse the bank of forcing homeowners with mortgages held by JPMorgan Chase to purchase more flood insurance than required by the federal government or by their actual lenders. In their class action lawsuits, the plaintiffs alleged that JPMorgan Chase required borrowers to carry excessive flood insurance coverage and that the bank unfairly profited from receiving commissions from the force-placed insurance policies. The plaintiffs argued that, in some cases, the force-placed insurance was as much as 10 times more costly than the coverage they would have been able to secure otherwise. They allege that JPMorgan Chase essentially got kickbacks from the insurance companies providing the policies, causing the bank to reap unfair profits.
The parties participated in alternative dispute resolution with an experienced mediator, during which time the parties “negotiated vigorously with each other and at arm’s length.” The three class action lawsuits were consolidated following the mediation.
Under the terms of the class action settlement, Class Members include all people in the United States “who were charged by JPMorgan Chase for lender-placed flood insurance (unless such charge was flat cancelled/refunded in full) in connection with a closed-end residential mortgage during the time period from January 1, 2007 to July 31, 2012, excluding Defendants, their affiliates, subsidiaries, agents, board members, directors, officers, and employees.”
The proposed force-placed insurance settlement provides for substantial injunctive relief. Under the terms of the class action settlement:
- JPMorgan will not require homeowners to carry flood insurance in excess of the federal minimum standard for three years
- JPMorgan will not accept any commissions from force-placed insurance for six years;
- For six years, JPMorgan will attempt to renew the borrower’s chosen flood insurance policy if the policy lapses; and
- JPMorgan will not seek to collect on any deficiency balance that exists on the date of the class action settlement’s final approval in the amount of any force-placed insurance premium.
The cash value of the class action settlement reflects approximately 74 percent of the commissions JPMorgan took in during the class period, which extends from the beginning of 2007 until July 2012. After court-approved fees are deducted, the remaining portion of the settlement fund will be distributed to plaintiffs on a pro rata basis in relation to their individual damages.
In September, JPMorgan Chase agreed to a separate $300 million class action settlement involving force-placed hazard insurance in Florida.
The plaintiffs are represented by Hagens Berman Sobol Shapiro LLP, Berger & Montague PC, and Taus Cebulash & Landau LLP, among others.
The JPMorgan Chase Force-Placed Insurance Class Action Lawsuit is Shelly Clements, et al. v. JPMorgan Chase Bank NA, et al., Case No. 3:12-cv-01279, in the U.S. District Court for the Northern District of California.
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