Residential property injury attorneys who signify policyholders for any size of time will finally come to the belief that getting a good verdict or settlement is barely half of the battle. If there may be an current mortgage on the broken property, the battle to make the Policyholder entire is much from over. Whereas it has proved tough lately to get the mortgage holders to endorse the checks for insurance coverage proceeds in order that we as residential property injury 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 nearly 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 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 verify and return it to us to be deposited into our belief account. Nonetheless, this mortgage holder explicitly acknowledged that even when we recommend the verify and submit it to them, they might 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 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 injury to the asset that secures the mortgage! This will likely look like a joke, however I promise you it isn’t. A survey of the opposite places of work in our agency revealed a number of the identical difficulties with the mortgage holders.
I had an epiphany. I recalled a hardly ever 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 positively was not lined on the Bar examination – scary 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 say 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.
On account of my unfamiliarity with scary a concursus continuing, I did some extra 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 price contract with a hurricane declare lawyer and had been profitable in recovering extra insurance coverage proceeds. The insurance coverage firms made the settlement checks payable to the home-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 in opposition to 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 home-owner’s and the insured home-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 home-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 consequence.
The Louisiana Courtroom of Attraction affirmed the judgment of the District Courtroom, holding that the regulation agency’s privilege for contingency price was superior to the mortgage holder’s curiosity as an extra loss payee beneath the insurance policies. The courtroom of attraction primarily based its holding on the applying of La. R.S. 37:218(A), which offers in pertinent half:
By written contract signed by his shopper, an lawyer at regulation might purchase as his price 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 courtroom particularly rejected US Financial institution’s meritless claims that “when an insurance coverage coverage incorporates a loss payee clause, the mortgagee is contractually entitled to all the insurance coverage proceeds earlier than the mortgagor-owner or these claiming by way of the proprietor are entitled to get well any quantity.” The courtroom primarily based its choice totally on the next uncontested details, which may function a bright-line check for these courts who adjudicate these claims:
- The owners have contingency price 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 firms;
- The insurance coverage firms have made the settlement checks payable to the home-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 concern.
As residential property injury attorneys and hurricane claims attorneys who signify policyholders, our advocacy can not finish with a good settlement or verdict in opposition to the insurance coverage firm. In an effort to adjust to our moral obligations, we should problem these unjustified, unwarranted obstructionist techniques that the mortgage holders are utilizing to grab proceeds that must 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 observe.
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 Frequent Regulation.
