Mortgage Company Rights to Check Funds

[hobbbes]

What is the name of your state (only U.S. law)? Michigan

We recently opened and closed a claim with our insurance company who subsequently determined that we were entitled to the policy limit and sent us a check. The check has the homeowners' names and the mortgage company's name. I understand that this is standard process for checks of a certain amount or higher.

My question is: does the mortgage company have any claim to this check if the payout was for an insurance policy rider that was above and beyond the mortgage company's standard homeowner's insurance requirements?

We are continuing to go back and forth with the mortgage company regarding the damages and how the check funds should be disbursed. I'd like to know if they even have a right to hold the funds since we were paying out of pocket for extra coverage that they didn't require.

Thanks for any time and consideration.

 

[FlyingRon]

EH?

You'll have to provide more details. The mortgage company has the right to make sure the property was restored satisfactorily before they endorse the check.
Unfortunately since the insurer issued the whole settlement in one check, you may have to wait until that happens to get any money.

If you're arguing that you owe money to the bank and they're trying to recover it from money you feel is compensation to you for something else (personal property rider or whatever), you may have an issue. Your other option is to go back and see if you can get that check cancelled and the two payouts separately issued: the casualty to the two of you and your personal property rider to you alone.

The last time I had a similar issue, the bank pissed off both me, the contractor, and the insurance company with their inane behavior. I quickly noticed the payout was more than was left on the loan, and told them to just take it and payoff the loan and I'd take care of paying the contractor myself (which in fact I'd already been forced to do). Amusingly, they sent the check back to me for my endorsement but stupidly they had already endorsed it when the did so, so I could have just cashed it at that point.

 

[hobbbes]

Thanks for the response Ron.

The standard homeowners policy that we are required to maintain does not cover sewer back-up. We took out a rider for sewer back-up when we purchased the house (not required) and experienced a flood in our basement. When I spoke with the claims adjuster to discuss the claim, I mentioned that we had appliances in the basement that may/may not have been permanently damaged (fridge, freezer, furnace, etc.) along with the bill for ServiceMaster to clean up the flood damage. He determined that we'd had sufficient damages enough to warrant the maximum policy payment amount of $10,000.

I understand that under normal circumstances (if this claim was under the standard homeowner's policy) the mortgage company has the right to protect the property from any loss. However, this was a policy beyond what they required which is why I'm wondering if I can dispute their claim to the check funds.

Please let me know if I can provide any additional information that might help with your advice.

Thanks Again.

 

[ecmst12]

If the claim was for contents, should they even have involved the mortgage company? Maybe they should have issued one check for the cleaning and a separate check for the appliances made out to you alone.

 

[Sophistry]

What was the breakdown of the damages? ie, 3,000 for Servicemaster; 2,000 for contents and 9,000 for structural?

I would call the ins company and ask that they reissue the checks; 1 to Servicemaster and you for clean-up; 1 to you for personal property; and 1 to you and bank for structural.

Depending on the numbers it could get more complicated.

To answer your question directly, I do not think that you can avoid the bank because the coverage, Homeowners plus (or whatever your company calls it), was an extra coverage.