Bankaholic, I believe Dianna is speaking of regular insurance...not flood, which carries it's own set of rules.
Dianna, at this point and prior to the new servicing rules on FP insurance...my opinion would be that it may depend on whether the FP insurance covers the borrowers interest or just your FI's. If the latter, I'd tread very carefully.
I believe putting this in the regular lending forum where you will get views by many people who have escrow experience would be beneficial. I know of no GA specific laws regarding this.
My opinion only. Not legal advice.
Say you'll haunt me - Stone Sour