The agreement also calls for J.P. Morgan Chase to stop accepting commissions for placing FPI from Assurant, the nation's top provider of FPI.

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

The proposed deal is the first nationwide settlement of allegations that banks and FPI carriers overcharged homeowners for insurance in cases where the homeowners were having problems paying their mortgages.

Florida, lawyers there said, has been a hotbed for these cases because the impact of the housing bust has been most acutely felt there. Moskowitz says, “Florida has more FPI in place than any other state.”

The court did not act on clearing the way for a final deal without being required to referee a battle between competing plaintiff's lawyers. Moreno did so by denying a motion to intervene filed by plaintiffs in a case first filed in California. The potential interveners claimed in their motion that the Florida settlement will inappropriately render their case moot in return for what the potential interveners charged will be an “illusory settlement structured to ensure minimum claimant participation.”

Documents filed in the case indicate that the California plaintiffs tried to intervene because the court that determines whether multi-district cases should be consolidated decided last year not to centralize the FPI cases.

According to documents filed by the lawyers for the California interveners, the settlement circumvents the interim class counsel's authority because the Chase and

Assurant defendants “have negotiated a settlement…that will extinguish the claims of the putative class in the consolidated action.”

The motion for intervention alleges, “As interim co-class counsel was making arrangements for a further mediation, defendants' attorneys, while refusing to confirm that they were engaging in settlement discussions, quickly agreed to terms of a settlement … putatively resolving the claims of the class in the consolidated action.”

In his brief, Moskowitz contended that the rights of the California interveners have not been violated. They argued that the interveners are seeking to “derail a settlement that provides substantial relief to a nationwide class of more than one million Chase mortgagors.”

The motion argued that the conflicting parties' request to intervene is “untimely, and they will not be prejudiced by its denial—they would still have the right to opt out or object to the settlement during the approval process.”

Intervention, Moskowitz contended “would prejudice the original parties to this action, as it could turn back months of hard-fought, arm's-length negotiations that culminated in settlement, and delay, if not undermine, the distribution of valuable relief to the nationwide class.”

Industry lawyers, who asked not to be named for fear it would impact their relationships with the courts as well as opposing counsel, say conflicts are arising because courts are now viewing FPI arrangements harshly, and are consistently rejecting various defense theories and giving plaintiff's lawyers leverage over settlement talks.

For example, in a New York case, a federal district court judge in Manhattan on Sept. 30 refused to throw out a portion of a suit against GMAC and Balboa alleging violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act. Judge Alison Nathan also ruled that even when force-placed insurance rates have been approved by state regulators, they can be challenged, a decision that industry lawyers said was significant.