Residential property harm attorneys who characterize policyholders for any size of time will ultimately come to the conclusion that getting a good verdict or settlement is just half of the battle. If there’s an present mortgage on the broken property, the battle to make the Policyholder complete is much from over. Whereas it has proved troublesome lately to get the mortgage holders to endorse the checks for insurance coverage proceeds in order that we as residential property harm attorneys can adjust to our moral obligation to deposit the funds into our belief account. Extra not too long ago, the mortgage holders have been virtually rabid of their obstructionist conduct in refusing to endorse the checks to be deposited in our belief account, additional delaying the Policyholder from receiving the insurance coverage proceeds and inflicting them to endure dwelling in a broken dwelling or displaced from their dwelling.
This week, our workplace had the misfortune of contacting a mortgage holder whose conduct can solely be characterised as obstructionist. Our agency offered the mortgage holder with all the paperwork requested. The mortgage holder’s place as of this writing is that they won’t endorse the examine and return it to us to be deposited into our belief account. Nonetheless, this mortgage holder explicitly said that even when we promote the examine and submit it to them, they’d not reimburse our bills (that are roughly $29,000.00), nor would they pay our earned lawyer charges out of the settlement proceeds. I used to be incredulous. The mortgage holder based mostly their place on the truth that they (the mortgage holder) didn’t rent us to characterize their mortgagees, that they (the mortgage holder) didn’t signal a retainer settlement with our agency, and that they (the mortgage holder) didn’t agree in any contract to reimburse the agency for litigation bills incurred in reference to the property harm to the asset that secures the mortgage! This will likely appear to be a joke, however I promise you it isn’t. A survey of the opposite places of work in our agency revealed among the similar difficulties with the mortgage holders.
I had an epiphany. I recalled a not often used continuing that we realized about in Second 12 months Regulation Faculty, Louisiana Civil Process – one that hardly merited a point out by the professor and undoubtedly was not lined on the Bar examination – frightening a concursus continuing. For the uninitiated, a “concursus continuing is one by which two or extra individuals having competing or conflicting claims to cash, property, or mortgages or privileges on property are impleaded and required to claim their respective claims contradictorily towards all different events to the continuing.” 1 Apparently, the verbiage used within the analysis is {that a} litigant doesn’t “file” a concursus continuing, a litigant provokes one.
Resulting from my unfamiliarity with frightening a concursus continuing, I did some further analysis. Seems, this isn’t unprecedented. In Irons v. US Financial institution, the mortgage holder took an analogous untenable place. 2 In Irons, the owners suffered damages to their residences because of Hurricane Katrina. They signed a contingency charge contract with a hurricane declare lawyer and have been profitable in recovering further insurance coverage proceeds. The insurance coverage corporations made the settlement checks payable to the house owner, U.S. Financial institution, and the hurricane declare lawyer. Given the moral mandate in Louisiana that an lawyer deposit settlement checks into its escrow account earlier than dispersing the funds, the hurricane declare lawyer requested that U.S. Financial institution endorse the checks. U.S. Financial institution refused to take action.
The policyholders and the hurricane declare lawyer provoked a concursus continuing towards U.S. Financial institution and subsequently filed a movement for abstract judgment. The District Courtroom excoriated US Financial institution, ruling that the mortgage holder did nothing to guard its curiosity, but anticipated to reap the advantages of the insured house owner’s and the insured house owner’s lawyer’s work and expense. The hurricane declare lawyer was the primary—and solely—lawyer to expend assets and energy to acquire an even bigger restoration on behalf of the house owner and, consequently, the mortgage holder. The hurricane declare lawyer alone interrupted prescription3 and commenced the accrual of judicial curiosity. Not permitting the hurricane declare lawyer to get well its charges could be an untenable end result.
The Louisiana Courtroom of Attraction affirmed the judgment of the District Courtroom, holding that the legislation agency’s privilege for contingency charge was superior to the mortgage holder’s curiosity as a further loss payee beneath the insurance policies. The court docket of attraction based mostly its holding on the applying of La. R.S. 37:218(A), which supplies in pertinent half:
By written contract signed by his shopper, an lawyer at legislation might purchase as his charge an curiosity in the subject material of a swimsuit, proposed swimsuit, or declare within the assertion, prosecution, or protection of which he’s employed, whether or not the declare or swimsuit be for cash or for property. Such curiosity shall be a particular privilege to take rank as a primary privilege thereon, superior to all different privileges and safety pursuits beneath Chapter 9 of the Louisiana Business legal guidelines.
The court docket particularly rejected US Financial institution’s meritless claims that “when an insurance coverage coverage comprises a loss payee clause, the mortgagee is contractually entitled to all the insurance coverage proceeds earlier than the mortgagor-owner or these claiming by the proprietor are entitled to get well any quantity.” The court docket based mostly its resolution totally on the next uncontested information, which might function a bright-line check for these courts who adjudicate these claims:
- The owners have contingency charge contracts with the hurricane declare lawyer for that agency to hunt elevated insurance coverage proceeds for his or her hurricane-related property damages.
- The hurricane declare lawyer succeeded in acquiring elevated insurance coverage proceeds from the owners’ insurance coverage corporations;
- The insurance coverage corporations have made the settlement checks payable to the house owner, the mortgage holder, and the hurricane declare lawyer;
- The hurricane declare lawyer has requested authorization from the mortgage holder to deposit the insurance coverage settlement checks into its escrow account; and,
- The mortgage holder didn’t take part within the restoration of the funds at problem.
As residential property harm attorneys and hurricane claims attorneys who characterize policyholders, our advocacy can not finish with a good settlement or verdict towards the insurance coverage firm. With a purpose to adjust to our moral obligations, we should problem these unjustified, unwarranted obstructionist techniques that the mortgage holders are utilizing to grab proceeds that needs to be disbursed to our purchasers and to the attorneys whose arduous work, substantial effort, and monetary threat advancing litigation bills secured these elevated insurance coverage proceeds for the policyholder in accordance with belief accounting guidelines that each lawyer is obligated to comply with.
1 La Code Civ. Proc. Artwork. 4651 (2025).
2 Irons v. U.S. Financial institution, Inc., 966 So. second 646, 647 (La. App. 4 Cir. 2007)(see additionally, Richards v. Louisiana Residents Prop. Ins. Corp., 623 F.3d 241 (5th Cir. 2010).
3 Prescription is a Louisiana Civil Code time period for what’s known as Statute of Limitations in Widespread Regulation.
