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.
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.