JPMorgan Chase & Co and an important insurer have agreed to a $300 million settlement to solve accusations that they forced homeowners into over-priced property insurance and entered into kickback arrangements that inflated the policies’ prices.
The lawsuit being settled - a few of the targeting large U.S. banks over force-placed insurance - said that the improper practices unjustly enriched JPMorgan and insurer Assurant Inc. by more than $1 billion since 2008.
JPMorgan and Assurant didn't admit any wrongdoing as part of the settlement, which was in documents filed late on Friday in a Miami federal court.
“The settlement may have no expected impact on our financials,†JPMorgan spokeswoman Amy Bonitatibus said in an announcement. She said the bank earlier this year discontinued a reinsurance agreement with Assurant.
The settlement demands JPMorgan to stop accepting commissions for force-placed insurance.
The JPMorgan settlement is the principle nationally to result from several cases against banks pending in Miami federal court that involve force-placed insurance.
REGULATORS TARGET PRACTICEBanks were under increasing scrutiny from regulators over force-placed insurance, it truly is placed by a bank or other mortgage lender to protect their interests in a property if the homeowner’s insurance lapses.
Mortgage agreements give lenders the ideal to force-place insurance, but regulators have accused banks and insurance companies of pushing up policy prices with improper commission and reinsurance agreements.
In an announcement, a spokesman for Assurant said the company places insurance per the terms of the mortgage and applicable regulations.
“The settlement is subject to court approval and we're unable to provide further comment while the difficulty is pending,†Assurant said.
The nation’s largest force-placed insurer, Assurant placed about 1.3 million policies for JPMorgan Chase, collecting more than $2.4 billion in force-placed premiums since 2008, per court documents filed by plaintiffs.
Assurant in March agreed to pay $14 million to settle a probe by the recent York state insurance regulator over its business arrangements with banks and mortgage servicers. Assurant neither admitted nor denied wrongdoing when it settled that investigation.
SEVERAL LAWSUITS PENDINGThe Big apple Department of financial Services had accused Assurant of paying commissions to banks and other mortgage servicers that created an incentive for the banks to force-place higher-priced policies.
Typically, Assurant entered into agreements that let reinsurance companies owned by banks absorb to 75 percent of the profit for sharing risks.
In an announcement announcing that settlement, Ny Governor Andrew Cuomo said JPMorgan made about $600 million since 2006 by taking 75 percent of the profits from the force-placed business it gave Assurant.
National lawsuits over force-placed insurance are still pending in Miami against Citigroup, Wells Fargo, Bank of America and HSBC Bank (USA), part of London-based HSBC.
A state-wide Florida lawsuit against Wells Fargo and QBE Insurance Corp. was settled in May for roughly $19 million.
The JP Morgan case is Salvatore Saccoccio v JP Morgan Chase Bank N.A. et al, No. 13-cv-21107, U.S. District Court, Southern District of Florida.
