The Minnesota Department of Commerce 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 also must 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 Commissioner Mike 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.”
Commissioner Rothman said the enforcement action against American Modern was 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.
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 included nearly 7,000 policies.
The settlement included 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.
Learn more: MinnesotaAmericanModernForcePlacedRestitution.com.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].