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#1580173 - 07/20/11 12:12 PM zone discrepancy - force place?
complyorelse Offline
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Joined: Nov 2007
Posts: 442
U.S.
We had a zone discrepancy that has since been resolved. The borrower has coverage at an X zone rate but now can't afford to pay for the new AE rate. Since we have coverage do we have to force place for the zone difference? If so, how? The amount of coverage in place is adequate. Do we have to force place for additional coverage even though they don't need it? This is mid policy term at this point.

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#1580243 - 07/20/11 02:26 PM Re: zone discrepancy - force place? complyorelse
Dani York, CRCM Offline
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Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
If the zone discrepancy was resolved and the insurance company "saw the light" and finally agreed with your determination, they should be re-writing their policy on the correct zone. If the borrower can't afford the premium differential, the insurance company will most likely cancel the policy for non-payment, causing you to HAVE to forceplace. One way or the other the borrower will have to pay the increased premium. They need to figure something out and pay their current ins company as that premium difference is far cheaper than your forceplaced insurance.

But yes you must have a policy written on the correct zone. The X policy written for the correct amount is still inadequate insurance.
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#1580731 - 07/20/11 09:56 PM Re: zone discrepancy - force place? Dani York, CRCM
lrj Offline
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lrj
Joined: Dec 2010
Posts: 137
Texas
I have this very situation and am running into the insurance company will not upgrade policy to AE and force placement insurance not able to insure for the difference. I am papering the file and trying to get GAP insurance in place while trying to resolve.
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#1580773 - 07/21/11 02:43 AM Re: zone discrepancy - force place? lrj
Dani York, CRCM Offline
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Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
I guess I am confused as tp why the insurance company won't re-write the policy if they have agreed that the property is in the higher zone. Have they given an explanation as to why they won't re-write?

See item 22 under cancellations in the insurance manual page CN6.

http://www.fema.gov/pdf/nfip/manual201105/content/13_cancellations.pdf
Last edited by Dani York; 07/21/11 03:00 AM. Reason: ETA: insurance manual info
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

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#1580807 - 07/21/11 12:46 PM Re: zone discrepancy - force place? Dani York, CRCM
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,844
Bloomington, IN
Quote:
the insurance company will not upgrade policy to AE


Most likely it's the agent and not the company.

We take a very simple approach. We don't deal with the agent. We inform the borrower they have to provide us coverage under the required zone. If their agent won't write it then they need to find a new agent.

The agent has no dog in the regulatory hunt. His only objective is saving his client money and making the FI look bad for requiring the higher priced coverage.
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#1580815 - 07/21/11 12:49 PM Re: zone discrepancy - force place? Dan Persfull
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
An agent who has determined that the bank's zone is correct and won't correct the policy has an errors & omission insurance problem. They have to write policies for the correct zone once that is determined/agreed upon to avoid liability.
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