McNeary-Calloway v. JP Morgan Chase Bank, N.A.

Decision Date26 March 2012
Docket NumberCase No. C-11-03058 JCS
CourtU.S. District Court — Northern District of California
PartiesPATRICIA MCNEARY-CALLOWAY, COLIN MACKINNON, TERRIE MACKINNON, ANDREA NORTH and SHEILA M. MAYKO, individually and on behalf of all others situated, Plaintiffs, v. JP MORGAN CHASE BANK, N.A. and CHASE BANK USA, N.A., Defendants.
I. INTRODUCTION

Plaintiffs Patricia McNeary-Calloway, Colin MacKinnon, Terrie McKinnon, Andrea North, and Sheila M. Mayko (collectively "Plaintiffs") initiated this putative class action on June 20, 2011, challenging Defendants JPMorgan Chase, N.A. and Chase Bank USA, N.A.'s (together "Defendants," or "Chase") practice of purchasing "force-placed" hazard insurance policies for home mortgage borrowers who fail to maintain adequate insurance. Defendants now bring a Motion to Dismiss Plaintiffs' First Amended Complaint ("the Motion"). Plaintiffs oppose the Motion. The parties have consented to the jurisdiction of the undersigned magistrate judge pursuant to 28 U.S.C. § 636(c). For the reasons stated below, the Motion to Dismiss is GRANTED in part and DENIED in part.

II. REQUESTS FOR JUDICIAL NOTICE

Defendants request that the Court take judicial notice of three documents that are matters of public record. Request for Judicial Notice in Support of Defendants' Motion to Dismiss Plaintiffs' First Amended Complaint ("Defs.' RJN"), 1-2. Plaintiff has not objected to Defendant's request orchallenged the authenticity of any of the attached documents. Accordingly, the Court takes judicial notice of these records pursuant to Rule 201 of the Federal Rules of Evidence. Further, the Court may consider these documents, along with the allegations in Plaintiffs' complaint, on a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Evidence. See Catholic League for Religious and Civil Rights v. City and County of San Francisco, 464 F. Supp. 2d 938, 941 (N.D. Cal. 2006).

Plaintiffs also request that the Court take judicial notice of three documents that are matters of public record. Plaintiffs' Request for Judicial Notice ("Pls.' RJN"). Defendants have not objected to Plaintiffs' request or challenged the authenticity of any of the attached documents. Accordingly, the Court takes judicial notice of these records pursuant to Rule 201 of the Federal Rules of Evidence.

III. BACKGROUND
A. Factual Background1

Defendants JPMorgan Chase and Chase Bank originate mortgage loans and acquire loans from other lenders. Plaintiffs' First Amended Complaint ("FAC"), ¶ 58. Prior to its merger into JPMorgan, Chase Home Finance acted as the servicer to these loans. Id. Each loan is secured by a deed of trust on the underlying property. Id. In order to protect its interest in the secured property, mortgage loan contracts typically allow the lender or third party servicer to "force-place" hazard insurance when the homeowner fails to maintain such insurance. Id. at ¶ 60. Plaintiffs allege that Defendants have purchased force-placed insurance ("FPI") "from insurers that provide a financial benefit to Defendants and/or their affiliates and at rates that far exceed borrower-purchased hazard insurance (while providing substantially less coverage)." Id. at ¶ 4. Additionally, Plaintiffs maintain that FPI policies are often improperly backdated to collect premiums for periods that have already passed. Id. at ¶ 2. Such policies can also be duplicative, where FPI coverage becomes effective immediately following the termination of the borrower's policy, because the lender istemporarily protected under the Lender's Loss Payable Endorsement (LLPE) in the borrower's policy. Id. at ¶ 86.

Plaintiffs bring this action on behalf of a purported nationwide class consisting of all persons whose hazard insurance was force-placed by Defendants beginning June 16, 2007. Id. at ¶ 123. Plaintiffs' action also includes two purported subclasses, a California subclass and a New Jersey subclass. Id.

The specific allegations concerning the Plaintiffs' FPI policies are as follows:

(1) Patricia McNeary-Calloway

On or about September 13, 2007, Ms. McNeary-Calloway and her husband, James B. Calloway, Jr., obtained a $540,000 refinance mortgage loan from Chase Bank, secured by their primary residency in Oakland, California. Id. at ¶ 18. In connection with their mortgage loan, Ms. McNeary-Calloway and her husband purchased a hazard insurance policy from California Casualty with an annual premium of $1,640. Id. at ¶ 19.

On July 4, 2009, Mr. Calloway passed away due to complications from a serious illness. Id. at ¶ 20. During Mr. Calloway's illness and following his death, Ms. McNeary-Calloway faced financial difficulties and was unable to make her hazard insurance payments. Id. Her policy lapsed effective August 26, 2009. Id. On or about January 8, 2010, Chase Home Finance purchased a one-year insurance policy with American Security Insurance Company ("ASIC"), backdated to August 26, 2009, with an annual premium of $4,233, charged to Ms. McNeary-Calloway's escrow account. Id. at ¶ 21. The policy was backdated, despite the fact that there was no damage to the property or claims arising out of the property for the lapse period. Id. The ASIC policy provided substantially less coverage than Ms. McNeary-Calloway's previous policy. Id. at ¶ 22.

In September 2010, Ms. McNeary-Calloway received a letter from Chase Home Finance, stating that, effective August 26, 2010, Chase Home Finance had renewed the FPI policy for another year at the same rate. Id. at ¶ 24. Following the receipt of this letter, Ms. McNeary-Calloway obtained her own insurance policy from Farmers Insurance Group with an annual premium of $1,103 and an effective date of September 1, 2010. Id. at ¶ 25. After receiving notice of this policy, Chase Home Finance sent Ms. McNeary-Calloway a letter stating that it canceled the FPI policy, butcharged her escrow account for retroactive coverage for the period extending from August 26, 2010 to September 1, 2010. Id. at ¶ 26.

(2) Colin and Terrie MacKinnon

Plaintiffs Colin and Terrie MacKinnon ("the MacKinnons") reside in San Diego, California, having purchased their home in 1994 with a loan from Royal Bank of Canada. Id. at ¶ 27. In July 2005, the MacKinnons refinanced through an online mortgage broker and Chase Home Finance purchased the loan very shortly after closing. Id. The MacKinnons had hazard insurance through AAA with an annual premium of $440. Id. Unbeknownst to them, the MacKinnons' homeowners' insurance policy lapsed on July 20, 2008. Id. at ¶ 28. The MacKinnons believe that the lapse was due to a computer error on the part of AAA. Id.

On November 5, 2010, Chase Home Finance sent the MacKinnons a notice stating that an FPI policy had been purchased from ASIC with an annual premium of $1,782, and backdated to cover the period between August 18, 2009 and August 18, 2010. Id. at ¶ 29. The MacKinnons do not recall seeing the notice at the time. Id. at ¶ 30. They later became aware of the lapse in coverage in December 2010 and immediately reinstated their AAA policy, effective December 10, 2010. Id.

In January 2011, the MacKinnons noticed two charges to their escrow account for FPI. Id. at ¶ 31. Specifically, on October 27, 2010, Chase Home Finance charged the MacKinnons a premium of $1,782 for a FPI policy backdated to cover the period from August 18, 2009 to August 18, 2010. Id. Three days later, on October 30, 2010, Chase Home Finance charged the MacKinnons a premium of $1,782 for an FPI policy backdated to cover the period from August 18, 2010 to August 18, 2011. Id. Once Chase Home Finance received proof of the MacKinnons' insurance policy reinstated as of December 10, 2010, it provided a pro-rated refund of $1,226 for the period of December 10, 2010 through August 18, 2011. Id. at ¶ 32. Accordingly, the MacKinnons were charged a total of at least $2,338 for FPI policies. Id. There was no damage to the property or claims arising out of the property for the lapse period. Id. at ¶ 33.

(3) Andrea North

Plaintiff Andrea North resides in Yorba Linda, California. Id. at ¶ 35. On or about April 3,2008, Ms. North obtained a loan from JPMorgan for the purchase of her home.2 Id. Ms. North obtained a homeowner's insurance policy from State National Insurance Co. with an annual premium of $1,084. Id. However, after Ms. North became seriously ill in 2009, her homeowner's insurance

policy was canceled effective April 23, 2009, for non-payment of the premium. Id.

On December 8, 2009, Chase Home Finance charged Ms. Woo and Ms. North $5,377 for a FPI policy from ASIC, backdated to April 23, 2009. Id. at ¶ 36. Ms. North's FPI policy was backdated, despite the fact that there was no damage to the property or claims arising out of the property for the lapse period. Id. On May 2, 2010, Chase Home Finance sent Ms. Woo and Ms. North a letter stating that it had renewed the policy for another $5,377, effective April 23, 2010. Id. at ¶ 37. Subsequently, Ms. Woo and Ms. North obtained their own insurance policy from Towers Select Insurance Co., effective June 8, 2010, for an annual premium of $1,134. Id. at ¶ 38.

Chase Home Finance canceled the second FPI policy effective June 8, 2010, but did not refund the initial $5,377 for the first FPI policy or the amount charged for the second FPI policy in effect from April 23, 2010 until June 8, 2010. Id. at ¶ 39.

(4) Sheila M. Mayko

Plaintiff Sheila M. Mayko resides in Riverside, New Jersey. Id. at ¶ 40. On or about January 11, 2002, Ms. Mayko purchased a residence at 200 Heulings Avenue, Riverside, NJ with a loan obtained from Chase Bank. Id. On or about June 30, 2003, Ms. Mayko obtained a $135,209 refinance loan with Chase Bank secured by the property at 200 Heulings Avenue. Id.

In January 2010, Ms. Mayko missed the 2010 hazard insurance premium payment of $1,064. Id. at ¶ 42. On January 19, 2010, Ms. Mayko's hazard insurance company,...

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