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Lender involvement in hurricane insurance payments

By ERIC P. FEICHTHALER - Real Estate Law | Oct 20, 2022

Dear Mr. Feichthaler:

I hope you and your family are OK after Hurricane Ian. Like so many others, I sustained significant damage to my home from wind. My insurance adjuster says we do need a new roof. I had enough money to put down the first payment, but I won’t have enough to make the payment once they have the materials in (which should be in eight weeks).

I am concerned that my mortgage lender will hold up the check even more, as my insurance company says payment will be both to me AND my bank. Is there anything I can do to avoid involvement of my bank?

–Beatrice G.

Dear Beatrice:

Thank you for this question. As you would expect, the vast majority of calls I am receiving relate to Hurricane Ian and the aftermath. I expect to be answering many questions like this over the next several months as we recover from the worst storm to hit Lee County in recorded history.

Your insurance policy will name your lender as an additional insured. The lender requires this to protect their investment in your house in cases just like this. If your home were a total loss, the lender wants to be able to recover the remaining balance on your loan.

The first step is obtaining a payout from your insurer. Even if the full extent of your damages is unknown, your insurer should be able to advance money to you for damages you know you do have. You note a field adjuster (the representative from the insurance company) has stated that you do need a new roof, which is a very good start. The field adjuster will send his or her report to your insurer, then a desk adjuster, along with other members of the insurance company, will review the claim. Once they determine a check can be issued, you will want to make sure through your agent and insurer that it does not represent full and final payment of your claim.

The check will be written to both you and your lender. The lender will be able to exercise significant control over distribution of funds as a result. Other payments from your insurance company, like payments for lost personal property or vehicles, would not be in the control of your lender, and would be paid to you directly.

My general advice to everyone that has insured damages is to document all losses as well as possible. Contact both your local insurance agent (who can be a great resource) and the insurance company itself. Also, many of my clients hired a home inspector to gain a full knowledge of damages that may have occurred. Many times, issues you may not be aware of exist, especially in the attic.

By now, you have likely been assigned a desk adjuster from the insurance company. You should also talk to your lender to see who will be the contact for the insurance payouts, and how they will be managed.

I have also received calls from clients with equity lines, but zero balances. In this case, the lender is still listed on the policy, even though there is no current money owed. To avoid involvement of the home equity lender, a call can be made to your local insurance agent, and provide proof no money is owed. In many cases, the insurance company will eliminate the lender from the equation, which will help streamline the process.

When it comes to insurance, contractors and all other issues relating to the storm, it is vital to be organized and keep good records. Personally, I hired a general contractor with a strong local history to oversee all of the needed repairs at my home. Some of my clients have hired public adjusters to navigate the insurance process, and others have hired our firm to represent them. I often talk about my preference to handle issues personally whenever possible, but this hurricane is one example where bringing experts in to assist can not only benefit financially, but bring a much needed peace of mind.

Our city has not faced anything remotely like this disaster in the 35 years I have called Cape Coral home. Through this devastation I have been heartened to see how neighbors are helping neighbors, and our community has come together in support of each other in the aftermath of Hurricane Ian.

I am proud to call Cape Coral home, and I thank each of you that has offered a helping hand to others.

Eric P. Feichthaler has lived in Cape Coral for over 35 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Museum of History, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 20 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator. He can be reached at eric@capecoralattorney.com, or 239-542-4733.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.