A recent ruling from the U.S. Court of Appeals for the Fourth Circuit has given insurers added clarity—and protection—on how they handle refunds for private mortgage insurance premiums. On June 16, 2025, the court held that insurers are not obligated to refund prepaid premiums when mortgage insurance is canceled outside the standard statutory guidelines.
The case, Steve Kovachevich v. National Mortgage Insurance Corporation, centered on whether a homeowner who had prepaid his mortgage insurance was entitled to a partial refund after the coverage was voluntarily canceled by his mortgage servicer. Kovachevich bought a home in Virginia in 2020 and, because he made a down payment of less than 20 percent, was required to purchase private mortgage insurance, or PMI. A year later, he asked for the insurance to be canceled. His servicer, LoanCare, initially said no, citing that he hadn’t paid down enough of his loan under the federal benchmarks. But it then agreed to cancel the coverage anyway—outside the standard rules—if Kovachevich met certain conditions.
After the cancellation went through, Kovachevich asked National Mortgage Insurance Corporation (NMIC) to refund part of the premiums he had prepaid. Both NMIC and LoanCare said no, arguing that under the Homeowners Protection Act (HPA), those payments were non-refundable in this context.
Kovachevich sued in federal court, saying the insurer had violated the law by refusing to return the money. The case was dismissed last year, and now the Fourth Circuit has affirmed that decision.
At the heart of the case was a narrow but important question for insurers: When exactly does the law require them to refund unearned premiums?
The court said that under the HPA, those refunds are only mandatory when PMI is canceled using one of three statutory methods—like hitting a specific equity threshold or reaching the midpoint of the loan’s amortization schedule. Because Kovachevich’s insurance was canceled voluntarily and not through one of those legal benchmarks, the court ruled that no refund was required.
In short, the decision confirms that mortgage insurers are only on the hook for refunds when specific federal standards are met. Voluntary agreements—common in real-world servicing—don't automatically trigger a repayment obligation.
While the lawsuit also included state-level claims for unjust enrichment and conversion, those were sent back to the lower court to decide whether it wants to take them up.
For mortgage insurers, the decision draws a clear line. It affirms that premium refund obligations under federal law are limited and predictable, reducing the risk of disputes over voluntary cancellations. It also gives insurers and servicers a more solid footing when drafting internal policies and responding to borrower requests.
There were no disputes in this case about the wording of an insurance policy or contract. Instead, the entire issue hinged on how the federal statute is interpreted and applied.
The case could be especially relevant for compliance officers, claims professionals, and legal teams at insurers that operate in the PMI space. With clear precedent now on the books, the industry has firmer ground when determining when—and if—refunds are required.
