How to Get a Mortgage Company to Release an Insurance Claim Check

By Ricky K. Patel Esq. 

During the settlement and negotiation phase of a typical first party property insurance case, the main objective for both parties is to determine the value of the claim and reach a settlement agreement. After settlement of their claim, many homeowners are surprised to learn that once they receive a settlement check, their insurance company will include their mortgage holder on the check as a payee. This is important because once a settlement agreement is reached, it is important to ensure that all proper and necessary parties are included as payees on the settlement drafts. Failure to identify all necessary parties can result in delays and unnecessary litigation over entitlement to insurance proceeds. You may be wondering who other than the insured would be entitled to a portion of any settlement proceeds recovered. In this blog post, we will first explain how to identify all third parties who may have an interest in an insureds insurance settlement proceeds. Then we will explain why some mortgage companies delay in releasing insurance claim proceeds and provide some tips for policyholders who would like reduce or prevent any delays in having their insurance proceeds released by their mortgage company.

How to Identify and Name All Payees: All parties who are entitled to payment of property insurance settlement proceeds must have standing to receive the proceeds due to their connection with the property that is being insured or the insurance claim itself. In general, if a party’s interest is not evident in the pertinent policy of insurance, the party is generally not entitled to any insurance proceeds. The course of identifying all interested parties begins when the policy is purchased and at that time it is the responsibility of the policyholder to notify the insurer of any third parties who have an interest in the property that is to be insured. During the life of the policy, the policyholder also has the responsibility to notify the insurer of any changes in the third party’s interest in the property being insured. Once a property insurance claim is made, there are sometimes additional third parties who have an interest in settlement proceeds. For instance, public adjusters may have an interest in the insured’s settlement proceeds. Third parties generally have a right to recover under a first party property insurance policy as designated additional insureds or loss payees. The difference between the two is that with respect to loss payments, the additional insured, as a party to the policy, has a direct right of payment under the policy to the extent of its interest in the property insured. In this regard, the additional insured may only have an interest in a portion of the property insured and will not be entitled to the entire settlement proceeds. A property insurance company who has notice of a third party’s interest under the policy or with respect to the claim itself, must be careful to take these interests into account when making payments on the claim.

Why Do Mortgage Companies Hold Insurance Settlement Proceeds?

Mortgage companies require homeowners to purchase homeowner’s insurance so that the property is protected in the event of a loss. This is how the mortgage company makes sure that their investment is protected. Over the years, our firm has noticed that after settlement of a property insurance dispute, many homeowners get frustrated when dealing with mortgage companies who refuse to release insurance settlement funds. This is a very common issue that continues to come up and it prevents homeowners from restoring their homes back to pre-loss condition. The idea here is that the mortgage company wants to protect its investment and make sure that the homeowner utilizes the proceeds to repair their home.

How to Get Mortgage Company to Release an Insurance Claims Check: In most states, there are no set regulations that address how an insurance company should handle settlement checks or whether the homeowner’s mortgage company should be included as a payee on the check. Each bank or mortgage company has their own set of rules on how they deal with this process. With that said, most insurance companies will go ahead and list the name of an insureds mortgage holder listed on the policy unless the holder fills out a waiver. For relatively minor property insurance claims, many insurance policies will include a waiver provision. However, in some states like Florida, a mortgage holder can apply the full settlement to the balance of the mortgage. This usually occurs if the homeowner is not making mortgage payments or the home is in foreclosure. To resolve this issue, homeowners should provide their mortgage company with an estimate for repairs or contract for repairs or construction with a reputable and insured contractor along with any invoices they may have. Please note that if a homeowner is conducting the work themselves, the processing of the claim may be delayed if the homeowner is not able to provide documentation (invoices or receipts) for the materials used. Additionally, homeowners should make sure that any communications with their mortgage company is in writing. For instance, it may be helpful to send a written letter to the mortgage holder requesting that they list the documentation and information that they need to be able to release the insurance proceeds. Finally, keep copies of every communication with the mortgage company, and hold them accountable for their obligations and duties under the law.

Do You Need Help with Your Undervalued Property Insurance Claim?

If you have additional questions about your insurance claim or are currently caught in an insurance dispute over damage to your property, contact us today at (305) 300-3000 for a free consultation. The attorneys at Farrell, Patel, Jomarron & Lopez recognize your rights as an insured homeowner, understand how the insurance claims process works, and know how to submit a strong homeowners insurance claim that will prevent your property insurance claim from being denied, delayed, or underpaid. Your home insurer will hire a team of attorneys who will work hard to make sure you don’t receive the compensation you are entitled to. You should have a team of lawyers working for you too! FPJL will aggressively represent you to ensure you get the money you are owed without any further delay by the insurance company. Our team of attorneys have decades of experience providing affordable representation to homeowners facing a wide range of denied, delayed or underpaid insurance claim issues.

Contact our law firm today at (305) 300-3000 for a free consultation!