Established in 1985, Merlin Law Group is a leading...READ MORE
Established in 1985, Merlin Law Group is a leading...READ MORE
While hurricane Irma has become a faint memory to the rest of the United States, Floridians have not forgotten. Many...READ MORE
Established in 1985, Merlin Law Group is a leading insurance litigation law firm committed to assisting policyholders receive fair and just outcomes from their insurance companies. Property insurance law is a highly complex and specialized area of law and our firm represents policyholders when claims are denied, delayed or underpaid. To learn more about Merlin Law Group visit: www.merlinlawgroup.com.
It is not uncommon to see claims where an insured’s lender makes an already difficult property insurance claim even more problematic. Generally, this occurs where:
Without the insurance money, many insureds do not have the resources to begin repairing property or resume business. Where the property damage is severe, insureds are often forced to incur substantial costs to rent other property, and cannot afford the rental costs on top of their mortgage. Things can quickly spiral out of control and the insured’s mortgage can go into default.
In situations like this, do insureds have any recourse against their lenders?
Like insurance policies, deeds of trust are contracts that contain an implied covenant of good faith and fair dealing.1 Although most deeds of trust give lenders the right to be named on insurance checks earmarked for property damage, a lender’s right “to apply insurance proceeds to the balance of a note secured by a deed of trust must be performed in good faith and with fair dealing. . . .”2
Courts have found that where the security is not impaired, the lender must release the insurance proceeds to the insured so that the insured may repair/rebuild their property. In the context of the rights of the parties to the insurance proceeds after an insured loss, when the insured demands the proceeds to repair the damage, and the deed of trust requires the insured to repair the damage, the covenant of good faith and fair dealing requires the lender to relinquish the proceeds to the insured for payment of the costs of repair, unless the lender needs the proceeds to protect its legitimate interests (i.e., where its security is otherwise impaired).When the insured’s loan is in good standing, impairment will normally involve a factual inquiry into whether the market value of the trust deed property still adequately secures the insured’s indebtedness. This is because the purpose of a deed of trust is to provide the lender with sufficient recourse should the insured default on the loan.3
Courts have found that lenders that refuse to release insurance proceeds to fund repairs before the loan is in default can be found to have violated the implied covenant of good faith and fair dealing.4
Lender told the Presslers that they had to front 33% of the costs-a condition found nowhere in the Deed-and though such an arrangement could be reasonable depending on the parties’ understandings and negotiations, nothing in the current record explains why it was here. See Pressler Decl. (dkt.22–1) ¶ 4. Then[…], after two years of a generally productive partnership to rebuild the house, Lender fell silent for four months after construction had ceased. Then, Lender conditioned its continuation of the funding on a new “pay as you go” scheme, which, like the 33% out of pocket condition, was not in the Deed.It makes sense that a lender should not be able to withhold insurance proceeds from an insured to cause a default on the loan and take possession of the insured’s property. This is because the parties (lender and insured) intended that the purchase price would be paid in the ordinary course of events, and that insureds would have the use of their property during the full period of the long-term loan.5 Insureds who (1) face property damage claims, are (2) not already in default on their loans at the time of the insurance claim payment, and (3) face lenders reluctant to release insurance proceeds, may pursue claims against their lenders for breach of the implied covenant of good faith and fair dealing.
Established in 1985, Merlin Law Group is a leading insurance litigation law firm committed to assisting policyholders receive fair and just outcomes from their insurance companies. Property insurance law is a highly complex and specialized area of law and our firm represents policyholders when claims are denied, delayed or underpaid. To learn more about Merlin Law Group visit: www.merlinlawgroup.com. When disaster strikes, stress and the feeling of being overwhelmed and unfamiliar with the process can make your property damage claim a lot worse.
Some incredible wind storms in various parts of the nation have caused a spike in claims. It is not uncommon for homeowners who are far away from the coast to go decades without ever having to file an insurance claim. But now with wind damaged properties, the insureds have a significant loss and are in a distraught state in this unfamiliar territory.
One call from last week prompted me to give some basic advice on what to expect in the very stages of the claim. The homeowner’s claim was in the early stages of the adjustment and she just wanted to understand the guidelines of how the process will work. She had questions (enough to contact an attorney) but she was also unsure because this was an entirely new process for her and her family. The windstorm and severe weather took down a large tree and the tree smashed into her home at about four in the afternoon. Even to the untrained eye an evaluation revealed there was significant roof damage and her minivan was totaled. This loss happened just moments after her husband had parked the van in the driveway. Wires and cable lines came down and crossed her road, closing it to traffic. She was so thankful that her husband had made it inside before the storm. Reality, though, did not allow her much time to be idle. She had to act because of the downed wires and make her reports.
Now, the carrier has had inspections but she didn’t know what would happen next. There was talk about the insurance company fixing the property for her but she wasn’t sure about the basics. When there is building damage to the property that the insurance company will indemnify you for under the policy, it is important at the very least that a formal written request is made by you for the complete policy and the scope or estimate of all the building damages that are included.
It is imperative that the insured have every form and endorsement along with the main body of the policy. Often the agent sends just the new renewal forms after a loss. However, those renewal forms modify the base policy and all these documents need to be read in tandem. Bottom line: you need both sets of documents.
Not sure what you are reading? Most states allow you to hire a public insurance adjuster to help you navigate this claim process. Check out http://www.napia.com or your state specific public adjuster group to find a licensed and qualified adjuster.
It is also imperative that you are provided the scope and estimate of damage that the insurance company has set forth. If you blindly sign an authorization with an insurance company or a preferred vendor and don’t insist on the scope of damages, how will you ever know what the insurance company is covering and what the contractor is supposed to be doing?
You need the scope and estimate to make sure that your property is being returned to its pre-loss condition and that the estimate replaces the items with like kind and quality materials. What you do not want to have happen is that the contractor determines there is more to fix but turns to you for payment because the carrier is not agreeable. Sorting all of this out before hammer and nail is the best practice. If construction and building components are not in your wheelhouse, a public adjuster can also assist. Generally, public adjusters have the same software to estimate the damages used by your insurance company, but public adjusters do not work for the insurance companies, they work for you.
Never blindly sign documents. Yes, there is a lot of stress but if there is one wise piece of advice that serves everyone, it is to understand what you are signing before you sign. Do not let the carrier’s urgency pressure you into dismissing the significance of your signature.
For more tips about insurance claims, a great resource comes from United Policyholders. These ten tips of insurance claims should be reviewed by anyone with a property claim whether it is going well or going south. While Tip 8 is critical, Tip 4 must also be highlighted. Remember: someone who is friendly is not the same as someone who is advocating for you. The insurance adjuster works for the insurance company and long after your claim is over they have a boss and a review process that makes a difference in their everyday lives. Thank you, Amy Bach, Esq., and United Policyholders for this helpful resource.Top 10 Insurance Claim Tips
The last clause is frequently referred to as “an ensuing loss exception.” Under this type of language, while the insurance company need not pay for damages caused solely by the excluded cause of loss, if there is an “ensuing loss,” the insurer must pay for that damage. A classic example is if faulty repair resulted in improper wiring and the improper wiring caused a fire. Almost every insurer would pay for the fire damage, but not for the repair of the improper wiring. Of course, as a practical matter, the fire damage would subsume the improper wiring and there would be no question as to what portion of the damage was covered and what portion was excluded.Of course, causation issues combined with exceptions to exclusions are usually interpreted far more broadly by policyholders and much more narrowly by many insurers. Jurisdictional decisions and policy language play a huge factor when confronting ensuing loss issues. The article warned of this in its conclusion:
When faced with this issue, risk manager and policyholder counsel should be sure to highlight the logical inconsistency in the broad reading of the exclusion and the narrow reading of the “ensuing loss” exception. In addition, the cost of repairing the faulty workmanship itself is most likely excluded under most versions of this exclusion (although there are forms which might allow such recovery) and resolution of claims will be easier if policyholders do not attempt to recover that cost as part of the claim. Of course, because different jurisdictions approach this in different ways, usually in one of the two outlined above, one must always be mindful of applicable law.To make certain the public adjuster was not accused of practicing law, I told her to tell the insurer I asked her to send the article to the insurer and that it should reconsider its coverage opinion. Insurance companies acting in good faith should be looking for reasons to find coverage for damage. It will be interesting to see what happens in this instance.
While hurricane Irma has become a faint memory to the rest of the United States, Floridians have not forgotten. Many businesses, resorts, and attractions are still struggling to bounce back after the catastrophe that caused wide-spread damage to the southern half of the state.
When it comes to Hurricanes, location and luck play a large role on who gets hit the hardest. However, it is important that property owners and managers take the proper measures to prepare before the storm so that their properties stand a chance in a quick recovery.
Below are several lessons management companies can learn from Hurricane Irma:
Plan for The Next Catastrophe
Assuming your property is not currently being repaired for Hurricane damage, it is crucial that management companies understand that natural disasters such as hurricanes pose as a large threat to a buildings infrastructure. Just because you have been lucky so far, does not mean you will always be spared. After a natural disaster, it is essential to have recovery teams on-site to decrease the extent of any further property damage. Unfortunately, right after a hurricane hits is the wrong time to look for a team to help you. Most disaster recovery teams prioritize their existing clients above new clients. Therefore, we strongly encourage you to find a reputable response team prior to a natural disaster ever occurring so that they can help you as soon as it is safe to do so.Choose a Reputable Team with Multiple Locations
The only way to ensure a swift recovery from a natural disaster is a quick response from your catastrophe response team. We cannot stress enough how important it is that your team has the ability to get to you within a timely manner.Dry Out as Quickly as Possible
Hurricane Irma struck over a month and a half ago and many properties have yet to be remediated in the worst-hit areas. Water has the tendency to cause worse damage, the longer the materials stay wet.
Within 72 hours, mold will start to grow. Once mold sets in, drying the materials out will no longer be an option and the materials will have to be thoroughly cleaned or removed. When properties are left for longer, other forms of growth and deterioration can occur, causing further damage. Worst case scenario, moisture that isn’t addressed will cause structural damage. The faster a team can get into the property with fans, dehumidifiers and other remediation efforts, the less damage the property will sustain.
If you’d like to have DCS on your side for the next incident, give us a call today.
Silica is an important industrial material found in the earth’s crust. Quartz, the most common silica is a component of sand, stone, rock, concrete, brick, and mortar. In its idle form, it is found to be harmless. However, silica dust can be dangerous to anyone who breathes it in. Dust particles can penetrate into the lungs causing lung disease, cancer, kidney disease and silicosis. According to OSHA’s statistics, roughly 2.3 million occupants are exposed to silica in their work places annually, including 2 million construction workers and 300,000 others.
Silica has been recognized as hazardous since the 1930s when the U.S. department of labor noticed a spike in worker deaths. It wasn’t until the 1970s when OSHA was created and a standard was set to limit worker exposure. However, workers were not adequately protected. Up until 2013, there were zero regulations placed for silica exposure which left contractors confused as to what was required. In September of 2013, a new OSHA regulatory standard was created and reviewed. The standard was approved to go into effect in June of 2016.
Reduces the permissible exposure limit (PEL) for respirable crystalline silica to 50 micrograms per cubic meter of air, averaged over an 8-hour shift.
Requires employers to: use engineering controls (such as water or ventilation) to limit worker exposure to the PEL; provide respirators when engineering controls cannot adequately limit exposure; limit worker access to high exposure areas; develop a written exposure control plan, offer medical exams to highly exposed workers, and train workers on silica risks and how to limit exposures.
Provides medical exams to monitor highly exposed workers and gives them information about their lung health.
Provides flexibility to help employers — especially small businesses — protect workers from silica exposure.
Property owners are unlikely to see an immediate impact from this ruling. However, they are required to disclose any information regarding known presence of silica-containing materials before signing a contract with a contractor to provide renovation services. It is also important that the owner informs building occupants that silica dust may present a potential hazard to them. By hiring the right contractor, the owner can ensure that the building is properly mitigated.