Recently, JPMorgan sought court approval to the terms of a settlement with parties in three class action cases. The cases were consolidated and alleged that JPMorgan force-placed exorbitantly priced flood insurance policies on homeowners whose mortgages were serviced by it.
The three separate suits filed in New York and California allege that JPMorgan force-placed flood insurance with more coverage than required by the federal government and their lenders and that JPMorgan reaped unfair profits and kickbacks by placing the policies. It was alleged the policies cost as much as ten times what the policyholders would have been able to procure in the insurance market and even forced excess insurance beyond the primary limits typically required by the federal government or their lenders.
Class members include those in the U.S. that were charged by JPMorgan for force-placed flood policies between January 1, 2007 and July 31, 2012.
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.1
In September, JPMorgan Chase agreed to a separate $300 million class action settlement involving force-placed hazard insurance in Florida.
1 JPMorgan To Settle $22M Force-Placed Insurance Class Action Lawsuit, www.topclassactions.com, Anne Bucher, December 19, 2013.