JP Morgan Chase’s Shady Flood Insurance Scheme for Borrowers

As San Francisco insurance attorneys we see how far greedy companies will go to try to squeeze more money out of their customers. And it is always gratifying to see people push back. As we tell our clients, often the only way to get these companies’ attention is through legal action. Otherwise insurance companies keep getting away with their strong arm tactics because they are so much more powerful and well funded than your average consumer.

A recent instance of this involves JP Morgan Chase and their mortgage lending policies. A class-action lawsuit was filed in the United States District Court for the Northern District of California, a federal court, earlier this month alleging nationwide abuse.

JP Morgan Chase makes its own determination as to whether borrowers need flood insurance-even if prior loan services on the same loan did not require it. If the company decides the homeowner needs flood insurance, it requests that the homeowner submit proof of insurance. If the homeowner does not provide such proof, JP Morgan Chase allegedly orders the insurance and charges it to the borrower’s escrow account.

Even more outrageous, the insurance company JP Morgan Chase uses in these scenarios is an affiliated brokerage entity in which the company has a financial interest. The lawsuit also alleges that JP Morgan Chase receives commissions, reinsurance kickbacks, and other benefits from this insurance company. Worse still, there is evidence that this flood insurance is sometimes completely unnecessary, is incredibly overpriced, and offers sub-par benefits. The premiums are as much as 10 times higher than the market rate for similar flood insurance and the coverage is inferior to comparable flood insurance, like that available through the National Flood Insurance Program.

The plaintiff in this case, Shelly Clements of Richmond, California, asserts that she bought a condo in 1999 and was not required to purchase flood insurance. She refinanced her mortgage in 2005 and was again not required to purchase flood insurance. It was only in 2010, after JP Morgan Chase had acquired her mortgage the year before due to the collapse of Washington Mutual that she was asked to provide proof of flood insurance on her condo. One month later, Ms. Clements claims she got a letter from JP Morgan Chase telling her such insurance had been placed on her property and that she was financially responsible for it.

The lawsuit is alleging breach of contract, not acting in good faith with its customers, and unjust enrichment. It calls the whole flood insurance process at JP Morgan Chase an ill-disguised “scam” to benefit the company through kickbacks and commissions at the expense of the hard-working homeowners trying to pay their mortgages in difficult economic times. It alleges that JP Morgan Chase also specifically chose to use substandard insurance coverage at exorbitant premium rates to further benefit themselves at the expense of their borrowers.

If you feel like you are being strong-armed or mistreated by your insurance provider, regardless of how you ended up with that provider, please contact a San Francisco or Oakland insurance attorney right away to discuss the problem.

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