New Rules Govern ‘Force-Place’ Insurance

TALLAHASSEE, Fla. – A new Florida law recently signed by Gov. Ron DeSantis, House Bill 793, creates a legal framework for writing forced-placed insurance coverage.

Mortgage lenders generally require borrowers to maintain property insurance, but they also have a backup plan: Force-place insurance (called collateral protection insurance (CPI) in Florida and lender-placed insurance in some places).

A CPI policy is “placed” by a bank or mortgage servicer on a home if the homeowners’ property insurance lapsed or their level of coverage is deemed insufficient by the bank or mortgage servicer. It sometimes occurs when their insurance company ceased doing business.

In recent years, force-place insurance has received significant media attention, along with allegations that insurers and lenders may be making excess profits on this line of business. Critics note that lender-placed insurance is typically more expensive than policies a borrower purchases directly and, at the same time, it provides more limited coverage.

Concerns have also been raised about “reverse competition” stemming from the use of lender-place insurance because the lender chooses the coverage provider and amount, but the borrower must pay for the coverage.

The bill creates a new part (Part XXII) of ch. 627, F.S., for the purposes of:

• Regulating CPI on real property
• Establishing a legal framework for the writing of CPI on real property in Florida
• Maintaining separation between lenders or servicers, and insurers or insurance agents
• Minimizing the possibilities of unfair practices in the sale, placement or solicitation, and negotiation of CPI.

The bill tries to ensure that an insurance premium is based on the “last known” replacement cost of the structure. In general, lawmakers wanted to match an insurer’s risk with the premium that the insurer charges.

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