Residential property harm attorneys who signify policyholders for any size of time will finally come to the conclusion that getting a positive 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 lately, 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 residing 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 supplied 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. Nevertheless, this mortgage holder explicitly said that even when we recommend 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 legal professional charges out of the settlement proceeds. I used to be incredulous. The mortgage holder primarily based their place on the truth that they (the mortgage holder) didn’t rent us to signify 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 look like a joke, however I promise you it’s not. A survey of the opposite workplaces in our agency revealed a few of the identical difficulties with the mortgage holders.
I had an epiphany. I recalled a not often used continuing that we realized about in Second Yr Regulation College, Louisiana Civil Process – one that hardly merited a point out by the professor and positively was not coated on the Bar examination – scary a concursus continuing. For the uninitiated, a “concursus continuing is one through 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 in opposition to 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 scary a concursus continuing, I did some further analysis. Seems, this isn’t unprecedented. In Irons v. US Financial institution, the mortgage holder took an identical untenable place. 2 In Irons, the owners suffered damages to their residences on account of Hurricane Katrina. They signed a contingency charge contract with a hurricane declare legal professional and had been profitable in recovering further insurance coverage proceeds. The insurance coverage corporations made the settlement checks payable to the home-owner, U.S. Financial institution, and the hurricane declare legal professional. Given the moral mandate in Louisiana that an legal professional deposit settlement checks into its escrow account earlier than dispersing the funds, the hurricane declare legal professional requested that U.S. Financial institution endorse the checks. U.S. Financial institution refused to take action.
The policyholders and the hurricane declare legal professional provoked a concursus continuing in opposition to U.S. Financial institution and subsequently filed a movement for abstract judgment. The District Court docket excoriated US Financial institution, ruling that the mortgage holder did nothing to guard its curiosity, but anticipated to reap the advantages of the insured home-owner’s and the insured home-owner’s legal professional’s work and expense. The hurricane declare legal professional was the primary—and solely—legal professional to expend sources and energy to acquire an even bigger restoration on behalf of the home-owner and, consequently, the mortgage holder. The hurricane declare legal professional alone interrupted prescription3 and commenced the accrual of judicial curiosity. Not permitting the hurricane declare legal professional to get well its charges can be an untenable outcome.
The Louisiana Court docket of Attraction affirmed the judgment of the District Court docket, holding that the legislation agency’s privilege for contingency charge was superior to the mortgage holder’s curiosity as an extra loss payee beneath the insurance policies. The courtroom of enchantment primarily based its holding on the appliance of La. R.S. 37:218(A), which offers in pertinent half:
By written contract signed by his consumer, an legal professional at legislation could purchase as his charge an curiosity in the subject material of a go well with, proposed go well with, or declare within the assertion, prosecution, or protection of which he’s employed, whether or not the declare or go well with 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 courtroom particularly rejected US Financial institution’s meritless claims that “when an insurance coverage coverage accommodates a loss payee clause, the mortgagee is contractually entitled to all the insurance coverage proceeds earlier than the mortgagor-owner or these claiming by means of the proprietor are entitled to get well any quantity.” The courtroom primarily based its choice totally on the next uncontested details, which might function a bright-line take a look at for these courts who adjudicate these claims:
- The owners have contingency charge contracts with the hurricane declare legal professional for that agency to hunt elevated insurance coverage proceeds for his or her hurricane-related property damages.
- The hurricane declare legal professional 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 home-owner, the mortgage holder, and the hurricane declare legal professional;
- The hurricane declare legal professional 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 situation.
As residential property harm attorneys and hurricane claims attorneys who signify policyholders, our advocacy can’t finish with a positive settlement or verdict in opposition to 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 shoppers and to the attorneys whose exhausting work, substantial effort, and monetary danger advancing litigation bills secured these elevated insurance coverage proceeds for the policyholder in accordance with belief accounting guidelines that each legal professional is obligated to observe.
1 La Code Civ. Proc. Artwork. 4651 (2025).
2 Irons v. U.S. Financial institution, Inc., 966 So. 2nd 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.
