Massachusetts Insurance Company Settles Claims Relating to Force-Placed Insurance

On November 23, 2015, the Attorney General’s Office for the Commonwealth of Massachusetts reached a settlement agreement with a Massachusetts force-place-insurance company relating to allegations that it required homeowners to purchase unnecessary or overpriced force-placed insurance policies.

Force-placed insurance is a form of homeowner’s insurance that may be acquired by a lender or mortgage servicer on behalf of a homeowner when the lender or servicer determines that the homeowner lacks adequate mortgage insurance.  The policies generally contain higher premiums than voluntary mortgage insurance and may contain limited coverage.  Servicers may rely on force-placed insurance companies to determine whether borrowers have obtained sufficient mortgage coverage.  If the insurance company​ determines the borrower has insufficient coverage, a force-placed policy is put in place and the servicer passes the premium directly to the borrower.

The Commonwealth alleged that the insurance company provided duplicative force-placed insurance despite the fact that the homeowners already had acceptable homeowners insurance policies.  The Commonwealth further alleged that in some instances, homeowners were mistakenly charged for commercial, rather than residential, force-placed policies.  The company consented to an assurance of discontinuance, which was filed in Suffolk County Superior Court.  Under the terms of the assurance, the company agreed to provide full refunds to homeowners for periods of duplicative service or overcharges.  The Commonwealth estimates that its audit will likely result in the payment of millions of dollars of relief to Massachusetts homeowners.  The assurance also requires the company to pay $565,000 to the Commonwealth.