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Regulatory and Litigation Trends Regarding Lender-Placed Insurance

Robyn C. Quattrone, Stephen M. LeBlanc & Dustin A. Linden

March 1, 2016

In recent years, LPI has been the subject of significant New York state regulatory action resulting in consent decrees prohibiting certain practices that were alleged to raise insurance rates. Similar federal action on behalf of GSEs may be forthcoming in 2016. In private litigation, LPI defendants scored a notable success recently, when the Second Circuit held that the filed-rate doctrine made LPI “kickback” claims immune from challenge in the courts. The authors review these developments.

Legal scrutiny of the lender-placed insurance (“LPI”) industry and its practices began in the wake of the mortgage crisis, and has continued to simmer ever since. It began with the filing of a host of lawsuits by the plaintiffs’ bar across the country against the major mortgage servicers and LPI providers, most, but not all, of which have reached settlements, and continued with certain regulators initiating investigations on an industry-wide basis, yielding substantial new regulations designed to change how LPI operates. This article surveys these regulatory and litigation trends and developments emerging over the last several years, which will define the LPI legal landscape for months and years to come.

Originally published in The Review of Banking & Financial Services; reprinted with permission.