Force Placed Insurance Notification: Is certified mail required?

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Question:

If a lender force places hazard insurance, are there any state or federal regulations that the policy and the disclosure letter be sent by certified mail? Are there any court cases which have established a precedent or would leave a lender exposed to litigation if the policy and the disclosure were not sent by certified mail?

Answer:

There have been numerous types of suits involving force placed insurance issues.

For example, there have been class action suits involving situations where the lender has force placed insurance, then passed on a charge to the customer that was greater than the actual cost of the insurance -- in effect retaining a commission for itself.

Other suits have related to when the disclosures were made and how they were made, as well as situation where the customer actually had insurance in place but, for whatever reason, the lender's records didn't reflect it and insurance was procured by the lender.

One source I found indicates that there are laws regulating force placed insurance in Connecticut, New Mexico, Florida, New York, Hawaii, Tennessee, Maryland, Texas, and Mississippi, as of 1999. I'm sure there have been major changes since then. http://207.86.39.38/Legislation_Litigation/New_Jersey.htm You should check with your institution's counsel to see if your state has such a law.

First published on BankersOnline.com 5/20/02