My Insurance Company Agreed to Pay My Claim; Now, How Do I Get My Money?
December 11, 2018 - MarcWites
After dealing with the initial stress of your home suffering property damage from a roof leak, storm, fire or other event, filing a claim with your insurance company, having your claim denied or underpaid, and eventually seeking legal intervention, you finally receive the phone call you’ve been waiting for from your attorney.
Your insurance company finally agreed to settle and pay your claim. Soon after you agree to the settlement offer, your attorney will contact you about the release the insurance company insists that you sign in order to receive payment.
What is a release, you might ask? A release is a formal document that is drafted by your insurance company in order to prevent you, the insured, from pursuing further legal action on the same claim. It is common for insurance companies to require that you sign a release as a condition of the settlement. In fact, it is common in the settlement of virtually all lawsuits.
When you sign the release you are acknowledging and accepting that the settlement amount to which you agreed is the full and final amount you will receive and that you will not make any more claims or file any more lawsuits for losses arising from the specific claim at issue in your case.
Your attorney will have reviewed your release before sending it to you to review and sign. But, of course, if you have any questions, you should ask your lawyer before signing.
Insurance Settlement Checks
Now you’ve signed the release, and your lawyer sent it back to the insurance company. What next? As soon as the insurance company receives the executed release it should issue the settlement checks. (If they don’t, call your lawyer right away.) Whether or not you have a public adjuster, a mortgage, and one or multiple claims will determine how your check(s) will be made out.
Typically, your attorney will attempt to have the insurance company cut separate checks, one for you, the insured, and one for the attorney’s firm. Every insurance company has different customs and procedures for issuing the checks. Here are a few things to keep in mind.
First, the insurance company likely will issue one check to you and one to your lawyer. This is because according to Florida Law (specifically, Florida Statutes Section 627.428) your insurance company is obligated to pay your attorney’s fees if you receive a settlement in litigation. In short, your insurance company, and not you, is responsible to pay your lawyer if you obtain a recovery in a litigation settlement or judgment from a trial. This is the most common practice for the issuance of checks.
In some cases, the insurance company may issue a single check that is made payable to both you and your attorney. Typically such a check is and should be made payable to your attorney’s trust account. In such case, your check will have to be deposited into your attorney’s trust account and once the funds clear, your attorney’s law firm will issue you a check to you from the firm’s trust account.
As previously mentioned, every insurance company is different; unfortunately, some insurance companies are more efficient than others with regards to paying their claims.
Homes With Mortgages
If you have a mortgage on your house, the issuance of the checks may be a little more complicated. In this event, the insurance company will list your mortgage company as a payee on your settlement check. Most policyholders are stunned to learn that their mortgage company is listed as an additional payee; unfortunately, your mortgage company has a vested and significant interest in your property based on the mortgage, and the mortgage provides them with a contractual interest in your settlement funds.
The reason is to protect the bank that lent you the money to buy your house, and the bank wants to make sure that you fix your home and maintain the value of your home. Should the property be damaged and not repaired, the value of the property would decrease which in turn puts the mortgage company at risk and possibly a loss.
The only way to avoid having your mortgage company listed as a payee on your settlement check is to provide documentation showing that you do not have a mortgage, never had a mortgage, or that the mortgage was satisfied. Typically you can obtain this information from your mortgage company or the public records.
So, if your mortgage company is also listed on your check, you have to sign the check and – yes – send it to your mortgage company, and they will hold your funds in escrow. This means the mortgage company will hold the funds and release them to you to cover the costs necessary to complete the repairs to your house. First, you will need to contact your mortgage company, inform them of the situation and the amount you were awarded in your settlement.
The mortgage company will inform you of all the documents they require in order to accept the check and then they will deposit it into their account. This typically includes a copy of the settlement agreement, the estimate for the repairs, and, of course, the actual check.
In most cases, after the mortgage company receives and processes your check and documentation they will release your funds in stages as the repairs are completed. Sometimes they will require one of their inspectors to inspect the property to make sure the repairs are being done. Pending a satisfactory inspection, the mortgage company will release the funds.
In other cases, an inspection may not be required. For example, perhaps you have already completed the repairs prior to the settlement of the claim or maybe the claim is very small. Or, maybe the money you need from the funds is to pay for materials, such as cabinets or tiles, in which case an inspection may not be required. It may also depend on the amount of your loan balance and the value of your home.
In short, every case is different, and the manner in which the mortgage company releases your funds may vary.
Because you have to satisfy the mortgage company in order to get your money, it is very important that you use only licensed contractors to repair your home, and that such contractors pull all necessary permits and follow the building codes. If they don’t’, you might not get your money
Also, the mortgage company likely will require the contractor to sign and submit a copy of their contract, releases for each payment, and sometimes other documents, in for the checks to be released.
Don’t Cut Corners!
Many people try to cut corners in order to save money on repairs. However, if you try to deceive your mortgage company they have the right to withhold the funds from your settlement. So, it’s best to provide full disclosure in order to make sure everything is properly completed and all contractors fully paid.
Yes, it’s true that even when your insurance lawsuit is over that you will still have time-consuming issues dealing with your mortgage company to get the money you are owed to pay the contractors to whom you now owe money to fix your house. You should be proactive and diligent in this process, and everything should work out fine.