JP Morgan Chase Bank, N.A. defeated policyholders' motion for class certification on Tuesday in a case challenging the bank's placement of flood insurance with American Security Insurance Co. on homeowners who had failed to secure their own insurance. District Court Judge Virginia M. Hernandez Covington of the Middle District of Florida rejected the certification bid, citing material differences in individual mortgages' insurance requirements and an absence of common contract.

The loan contracts were at the heart of the dispute because loan contracts generally require homeowners to keep their home adequately insured, and entitle banks to "force-place" insurance in the event the homeowner fails to comply. The policyholder-plaintiffs claimed that this lender-placed insurance charged high premiums and JP Morgan received some portion of the premium as a brokerage fee. Lender-placed coverage is guaranteed, and therefore not underwritten, and thus the premiums are much higher. Banks generally advise homeowners to secure their own insurance to avoid the high premiums, and lender-placed insurance is only applied when necessary.

Several class actions have been filed across the country in the last year challenging lender-placed insurance, but plaintiffs have yet to certify a class successfully.

Attachments:

Gordon v. JPMorgan Chase class certification denied

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