Sen. Montigny files bill to hold lenders liable for unpaid escrowed insurance premiums

Sen. Mark C. Montigny filed legislation on Jan. 16, 2025, that would make lenders financially responsible if they neglect to pay property insurance premiums from a borrower's escrow account when sufficient funds are available.

The bill, filed in the Senate as Docket No. 1502 (Senate No. 794) and referred to the Committee on Financial Services, would add subsection (d) to Section 4 of Chapter 167E of the Massachusetts General Laws. Under the proposed language, if a bank requires a borrower to escrow a property insurance premium and the bank fails, through neglect, to pay a due premium despite sufficient escrow funds, and the property owner suffers a loss as a result, the bank would be liable for that loss up to the coverage limits of the lapsed insurance policy.

In addition to liability up to the policy limit, the bill requires the bank to pay the missed insurance premium and any increased cost to secure a new insurance policy for a period of three years. The bill also directs that the bank pay any late fee charged by the insurance company when the bank is late in paying the premium.

The filing cites the 2022 Official Edition of the General Laws and specifically proposes inserting the new subsection after subsection (c) of Section 4, Chapter 167E. The text states the liability exception is limited to the coverage limits of the lapsed policy and establishes the three-year obligation to obtain replacement coverage and to cover late fees.

The filing notes a similar measure, Senate No. 685, was filed in the 20232024 session. At filing, no committee hearing, votes, or enactment date are specified; the bill is recorded as introduced and referred to the Senate Committee on Financial Services. Any legal effect would depend on subsequent committee action and passage by the General Court.

If enacted, the change would affect mortgage lenders, servicers that manage escrow accounts, and property owners with escrowed insurance arrangements in Massachusetts. The bill text does not specify implementation mechanisms, enforcement provisions beyond the stated liability, or an effective date.