A federal appeals court has ruled that banks can require a homeowner to buy flood insurance covering the full replacement value of a home rather than the amount of the mortgage loan.
The First Circuit Court of Appeals made that decision in Kolbe v. BAC Home Loans Servicing, LP.
The decision was handed down through a class action lawsuit where the named plaintiff, Stanley Kolbe, sued BAC Home Loans Servicing for damages alleged to have arisen out of the bank's requirement that he maintain flood insurance in an amount sufficient to cover the replacement value of his home, $250,000, rather than the amount of the loan, $197,437.
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