cat8 said:
We received a check made out to us and our mortgage company for a damage claim we filed. Now the mortgage co. says they will send us half of the money to do the work and half after their inspector has approved the work. Is this legal?
My response:
The following response references California law. However, your question is still answered with a "Yes" because the concept is, nonetheless, universal throughout the 50 States.
A lienholder has the right to insurance proceeds where the trust deed requires that it be named as loss payee with the right to apply the proceeds to reduce the loan. [Martin v. World Sav. & Loan Ass'n (2001) 92 Cal.App.4th 803, 809, 112 Cal.Rptr.2d 225, 229
Of course, the mortgagee (lienholder) has no right to policy benefits **unless** it is named as a co-insured or "loss payee" who has a contractual right to share in such benefits (below). [See Foothill Village Homeowners Ass'n v. Bishop (1999) 68 Cal.App.4th 1364, 1373, 81 Cal.Rptr.2d 195, 201--lender that did not require earthquake insurance as condition of loan not entitled to proceeds from earthquake policy (allowing borrower to keep insurance proceeds without rebuilding or repairing damage)]
IAAL
