A federal court in Miami has cleared the way for final action ina force-placed insurance (FPI) lawsuit against J.P. Morgan Chasethat is consistent with the emerging belief that federal courts aregoing to come down harshly on the side of consumers in FPIlitigation.

"This settlement can be a road map for settlements with otherdefendants," says Adam M. Moskowitz, of Kozyak Tropin &Throckmorton in Miami, co-counsel in the J.P. Morgan Chase case."This is the first nationwide settlement for hazard claims (themajority of the coverage)."  Moskowitz has class actionlawsuits pending in the same court before the same judge in fourother FPI cases involving major mortgage servicers.

Judge Frederico Moreno, chief judge of the U.S. District Courtin Miami, Tuesday granted preliminary approval and set a finalfairness hearing for next February in a case involving 1.3 millionpeople.

According to the proposed agreement, the deal could be worth asmuch as $300 million to 1.3 million homeowners nationwide. Inaddition, plaintiffs' lawyers could get up to $20 million.

The agreement also calls for J.P. Morgan Chase to stop acceptingcommissions for placing FPI from Assurant, the nation's topprovider of FPI.

J.P. Morgan and Assurant, under the agreement, will also berequired to make payments to homeowners equal to 12.5 percent ofthe insurance premium each affected homeowner was charged.

The proposed deal is the first nationwide settlement ofallegations that banks and FPI carriers overcharged homeowners forinsurance in cases where the homeowners were having problems payingtheir mortgages.

Florida, lawyers there said, has been a hotbed for these casesbecause the impact of the housing bust has been most acutely feltthere. Moskowitz says, "Florida has more FPI in place than anyother state."

The court did not act on clearing the way for a final dealwithout being required to referee a battle between competingplaintiff's lawyers.  Moreno did so by denying a motion tointervene filed by plaintiffs in a case first filed in California.The potential interveners claimed in their motion that the Floridasettlement will inappropriately render their case moot in returnfor what the potential interveners charged will be an "illusorysettlement structured to ensure minimum claimantparticipation."

Documents filed in the case indicate that the Californiaplaintiffs tried to intervene because the court that determineswhether multi-district cases should be consolidated decided lastyear not to centralize the FPI cases.

According to documents filed by the lawyers for the Californiainterveners, the settlement circumvents the interim class counsel'sauthority because the Chase and

Assurant defendants "have negotiated a settlement…that willextinguish the claims of the putative class in the consolidatedaction."

The motion for intervention alleges, "As interim co-classcounsel was making arrangements for a further mediation,defendants' attorneys, while refusing to confirm that they wereengaging in settlement discussions, quickly agreed to terms of asettlement … putatively resolving the claims of the class in theconsolidated action."

In his brief, Moskowitz contended that the rights of theCalifornia interveners have not been violated. They argued that theinterveners are seeking to "derail a settlement that providessubstantial relief to a nationwide class of more than one millionChase mortgagors."

The motion argued that the conflicting parties' request tointervene is "untimely, and they will not be prejudiced by itsdenial—they would still have the right to opt out or object to thesettlement during the approval process."

Intervention, Moskowitz contended "would prejudice the originalparties to this action, as it could turn back months ofhard-fought, arm's-length negotiations that culminated insettlement, and delay, if not undermine, the distribution ofvaluable relief to the nationwide class."

Industry lawyers, who asked not to be named for fear it wouldimpact their relationships with the courts as well as opposingcounsel, say conflicts are arising because courts are now viewingFPI arrangements harshly, and are consistently rejecting variousdefense theories and giving plaintiff's lawyers leverage oversettlement talks.

For example, in a New York case, a federal district court judgein Manhattan on Sept. 30 refused to throw out a portion of a suitagainst GMAC and Balboa alleging violations of the RacketeerInfluenced and Corrupt Organizations (RICO) Act. Judge AlisonNathan also ruled that even when force-placed insurance rates havebeen approved by state regulators, they can be challenged, adecision that industry lawyers said was significant.