Leslie C. Blakey and Denise Michaux, 664 B.R. 221

After the Debtors’ (Blakey and Michaux) homeowner's insurance policy lapsed, their mortgage lender (First Federal Savings & Loan Association of Greene County) obtained a force-placed insurance policy on their home.
The new policy insured the property for $895,000, while the home's fair market value was between $135,000 and $200,000.
The annual premium for the force-placed policy was $9,437, a figure several times greater than standard homeowner insurance.
The Debtors later reinstated their own insurance with a $491,139 policy, costing $2,488.12 per year.
The Lender sought reimbursement for the force-placed insurance premium as a postpetition expense in the Debtors’ ongoing Chapter 13 bankruptcy case.
The Debtors objected, claiming the coverage was excessive and the premium unreasonable.

Issue	Debtors' Argument	Lender's Argument	Held
Entitlement to reimbursement under § 506(b) and Rule 3002.1(c)	Reimbursement should be denied because the coverage was excessive and premiums were unreasonable.	Reimbursement is proper; Lender acted within contractual/mortgage authority and prior coverage history justified the amount.	Excessive coverage made the premium objectively unreasonable; objection sustained.
Scope of force-placed insurance allowed by mortgage	The mortgage only allows coverage necessary to protect the lender’s interest or the property’s fair market value.	Mortgage terms give lender broad discretion to set coverage amount, including matching prior policies.	Mortgage supports coverage up to fair market value, not far in excess; lender’s action was unreasonable.
Compliance with federal regulations on force-placed insurance	Premiums were not bona fide nor reasonable because coverage far exceeded the home's value.	Charges were real costs for actual services rendered; no law prohibits the charge.	Out-of-pocket expense isn’t determinative; coverage over four times property value is not reasonable or bona fide.
Basis for determining reasonableness of premium	Reasonableness should be objective and based on property value; prior over-insurance by debtors irrelevant.	Reasonableness based in part on actual cost and administrative practices, plus debtor's prior choices.	Objective standard applies; lender cannot rely on debtors’ past conduct to justify reasonableness.

In re Allegheny Int'l, Inc., 954 F.2d 167 (3d Cir. 1992) (discussing the burden of proof and presumption of validity for bankruptcy claims)