Chase Settles Suit Over Force-Placed Insurance
MIAMI (CN) - On top of a $300 million settlement related to force-placed hazard insurance, JPMorgan Chase owes more than $20 million in attorneys' fees, a federal judge ruled.
Salvatore Saccoccio represents a class of 762,390 people who claimed that the bank forced borrowers to buy inflated insurance policies in a scheme with a company called Assurant.
The 2012 complaint alleged that Chase let Assurant force new coverage on the properties of borrowers in the event of a lapse or detection of insufficient coverage, in exchange for having Assurant insure its entire mortgage portfolio.
Assurant paid Chase commissions on these policies, but the class said they were actually kickbacks.
allegedsubsidiaries to cover its entire mortgage portfolio. ln exchange for this policy, Chase granted Assurant the exclusive right to force new coverage on borrowers' properties in the event of lapse or the detection of insufficient coverage. ln turn, Assurant provided with commissions or "kickbacks'' on the policies and entered into exclusive reinsurance agreements with Chase.
In July 2013, Chase agreed to pay $300 million to Saccoccio and the class of 762,390. It includes the class member will recover 12.5 percent of the net premium charged, less any refund made to them during the period.
The settlement also imposes a six-year injunction against Chase and Assurant from inflating premiums imposed on mortgagors.
U.S. District Judge Frederico Moreno gave the deal, which carries an additional $20 million for class counsel, preliminary approval in October and granted final approval last week.
The 27-page opinion rejects 16 objections to the settlement, including one challenge to the process of having class members submit claims to receive compensation. Submitting claims is appropriate since the defendants said they would need a thousand people a month to identify class members by manually reviewing files.
Saccoccio will take home a $5,000 service award, according to the ruling.
The settlement agreement covers all borrowers nationwide who had a hazard insurance policy force-placed on residential property by Chase between Jan. 1, 2008, and Oct. 4, 2013, who either paid the premium of the policy to Chase or were charged a premium and still owe at least some portion of the premium.
Force-placed insurance lawsuits have rocked banks like Chase across the country.
The ability to force-place hazard insurance is a typical clause in most mortgage loan contracts, as it is considered a method of protecting the lender's interest in the secured property.
In these cases, borrowers claim that the insurance provides a financial benefit to the banks or their affiliates and at rates that far exceed borrower-purchased hazard insurance, while providing substantially less coverage.
A pending multidistrict litigation against five lenders, including Bank of America, CitiBank, Wells Fargo, HSBC Bank and Chase also accused the banking giants of forced-placed insurance.
Judge Moreno noted that the case against Chase and Assurant was spun off from one against five lenders.