Have you encountered an insurer refusing to pay even when a valid contract exists with contractor, but insurer is concerned that lender will withhold insurance proceeds for past due mortgage? Does 627.707 (e) create an affirmative obligation for insurer to address with lienholder?

Generally speaking, a lien holder does have a equal right to be included in insurance payments as you do as the homeowner. Arguably, this could change if the lien is not recorded with the carrier or if the lien does not create a secured interest. I will explain further. First, if the lienholder is not recorded with the carrier that means they are not named on the contract. The contract is what governs everything in these cases and if you are not a party to that contract you arguably may not have any rights. Now, I have heard the counter argument that if the carrier is on notice that a lien exists, even if it is not named in the policy, the carrier still has an obligation to protect that lienholders rights and must include them in the payments. This issue really has not reached a point where it has required judicial intervention in any of our cases and I am not aware of any appeallate case law on the issue so as with most of the legal profession, we do not know what the right answer is but, at least the argument is there.

The second point I mentioned is that if the lien holder does not have a secured interest, it may not be entitled to any if these proceeds. There is a seldom referenced Florida Statute 627.70121 that states insurance money SHALL NOT include a lien holder on the check if the benefits being paid are not subject to a recorded security interest. This is more commonly seen in situations where benefits are being issued for things such as additional living expenses, damaged personal property or attorney fees. None of these things are encompassed within the lien and therefore the insurance company can not require the bank to be included in those payments. Arguably in my mind, it is possible as well to state that a second mortgagee or line of credit may also not be required to be included as often those may not have a secured interest in the property. Again, I can not say for sure what the answer is and would encourage a foreclosure or real estate lawyer to chime in to help.

Now finally, if you are behind on your payments, your lenders rights to that money become even stronger and they may argue that they get the money before you, or the house, does. Reality is though that the money paid out by the carrier is supposed to be for one purpose, repair the house. No one, including the mortgage company, should make out otherwise. So if your lender is trying to keep the money then you argue it has to go to repairs and most judges in Florida should force them to release that money for repairs. If you just want the money for yourself and don”t want to repair, you are most likely out of luck.

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