An Act relative to the fiduciary responsibility of lenders for non-payment of insurance premiums from escrowed accounts

This bill requires Massachusetts banks that manage insurance escrow accounts to pay any property insurance premiums they fail to remit due to their own negligence. If a bank misses a payment despite having enough funds in the account and the homeowner suffers a loss because of it, the bank becomes financially responsible for that loss. The law limits the bank's liability to the amount of coverage that would have been provided by the original policy and mandates that the bank cover the cost of a new policy for three years. Additionally, the bank must reimburse the insurance company for any late fees incurred because of the missed payment. These changes directly affect lenders who collect escrow funds from borrowers and homeowners who rely on those funds to maintain their property insurance.