I am going to split this into players A and B to simplify my question;(placement rules applied)
Player A has a road which is 7 in length and has the Longest Road tile,
Player B has a road which is 5 in length (second longest road),
Player B builds a settlement mid-way along Player A's road resulting in Player A now having two roads - a length of 4 and a length of 3.
Does Player A surrender the Longest Road card as his previous longest road no longer exists? (and as a result Player B obtains this honour)
Also, if (in the above example) Players B and C had a road less than 5, would the Longest Road card return to the bank?