JPMorgan to Pay Multi-Million Settlement over Mortgage Crisis


business litigation lawyer AtlantaJPMorgan Chase & Co. has agreed to pay a $400 million settlement to the carrier of its liability insurance following the crash of the mortgage-backed securities market. Insurer Syncora claimed that  JPMorgan misrepresented the risk in purchasing the securities, causing Syncora to have to pay out hundreds of millions in claims to purchasers of the securities from JP Morgan.


The trouble began in 2008, when Bear Stearns created and sold hundreds of millions of mortgage-backed securities. Then, as the loans they were based on began to default, Bear Stearns faced a collapse due to claims of securities fraud. JP Morgan absorbed Bear Stearns in the taxpayer bailout of the finance industry in 2008, and Syncora began having to pay out insurance claims relating to the losses in the amounts of $320 million, $94 million and $50 million.


Over the next four years, Syncora filed four lawsuits against JP Morgan and former Bear Stearns subsidiary EMC. JPMorgan  argued that Syncora knew the investments were risky or failed to do sufficient due diligence to determine the level of the risk. Syncora countered, however, that EMCs own records indicated that EMC impeded Syncora’s ability to conduct due diligence.


Syncora has announced that the settlement will allow the company to survive at least in the short run.


Generally, liability insurance policies do not cover intentional wrongdoing such as securities fraud, so it was unusual for Syncora to be on the hook for the payments to the claimants. If the claims were based on negligence by JP Morgan and Bear Stearns, which many savvy plaintiffs lawyers do to make sure the claims are covered by insurance, Syncora would be obligated to pay the claims, which Syncora did. Syncora then was able to show that it would not have insured the securities but for Morgan’s and Stearns’ fraudulent misrepresentations as to the risk of insuring the securities.


Whether your business is contemplating entering into a contract with a customer or vendor, or you have concerns about a pending contractual dispute, you need a smart, experienced business litigation attorney to represent your interests. James J. “Jim” Thomas II has more than 35 years of courtroom experience handling complex business litigation as well as analysis, evaluation, and resolution of existing and potential litigation in business law cases. Visit online, or give Jim a call at 404-869-5248 to set up a free consultation.


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