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Minnesota Commerce Department takes action against insurance company for overcharging Minnesota homeowners for “force-placed” insurance

6/27/2016 11:08:24 AM

American Modern Insurance Group must pay $1 million fine, provide refunds to homeowners and reduce rates by 43%

SAINT PAUL – Minnesota Commerce Commissioner Mike Rothman announced that his agency has imposed a $1 million penalty against American Modern Insurance Group, with a requirement that the company provide refunds to Minnesotans who were overcharged for “force-placed” insurance on their homes. The company must also reform its business practices and lower its rates by 43 percent going forward.

“The Commerce Department investigation found that, for years, American Modern charged excessive rates to Minnesota homeowners who were forced to buy its policies,” said Rothman, whose agency regulates the insurance industry. “This settlement will provide refunds to Minnesotans who were overcharged in the past, while protecting consumers against unfair and costly insurance practices in the future.”

Rothman said the enforcement action against American Modern is part of a broader investigation of business practices and rates charged by companies selling force-placed insurance policies.

A force-placed policy is a type of homeowners insurance that a lender or mortgage servicer obtains, at the borrower’s expense, if the borrower’s own homeowners coverage lapses or is canceled.

Sometimes, the lapse or cancellation may be the result of financial hardship on the part of the homeowner. But in some instances, insurance may be force-placed in error or due to a dispute about required coverage.

Force-placed policies are often significantly more expensive than voluntary homeowners insurance while providing less coverage. For example, it typically does not cover the homeowner’s personal property or third-party liability.

The Commerce Department investigation found that American Modern charged excessive rates in a non-competitive market for force-placed insurance and submitted inaccurate information in support of its rates.

The Commerce Department settlement with American Modern Insurance Group covers force-placed insurance policies issued or active in Minnesota at any time from January 1, 2008, to March 22, 2016. The Commerce Department estimates that this includes nearly 7,000 policies.

The settlement includes the following American Modern affiliates and subsidiaries:

• American Family Home Insurance Company
• American Modern Home Insurance Company
• American Modern Select Insurance Company
• American Southern Home Insurance Company
• American Modern Surplus Lines Insurance Company
• Midwest Enterprises, Inc. d/b/a/ Ameritrac

Under the settlement, Minnesota homeowners who were overcharged or improperly charged for force-placed insurance policies have the right to submit a refund claim. A notice with claim form will be mailed later this year to Minnesotans who were force-placed by American Modern during the 2008-2016 period.

More information about the claims process with American Modern is available at:

• Website: MinnesotaAmericanModernForcePlacedRestitution.com

• Email: info@MinnesotaAmericanModernForcePlacedRestitution.com

• Toll-free helpline:1-855-907-3158

• Mail: Minnesota American Modern Force Placed Restitution Program, c/o GCG, PO Box 10269, Dublin, OH 43017-5769

Commerce is here to help

If you have a question or concern about insurance, contact the Commerce Department’s Consumer Services Center by email at consumer.protection@state.mn.us or by phone at 651-539-1600 or 800-657-3602 (Greater Minnesota).

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