Residential property injury attorneys who characterize policyholders for any size of time will ultimately come to the belief that getting a good verdict or settlement is just half of the battle. If there may be an current mortgage on the broken property, the battle to make the Policyholder complete 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 just 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 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 test and return it to us to be deposited into our belief account. Nonetheless, this mortgage holder explicitly said that even when we promote the test 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 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 injury to the asset that secures the mortgage! This may increasingly look like a joke, however I promise you it’s not. A survey of the opposite places of work in our agency revealed a number of the similar difficulties with the mortgage holders.
I had an epiphany. I recalled a hardly ever used continuing that we discovered about in Second Yr Legislation Faculty, Louisiana Civil Process – one that hardly merited a point out by the professor and undoubtedly was not coated 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 extra analysis. Seems, this isn’t unprecedented. In Irons v. US Financial institution, the mortgage holder took the same untenable place. 2 In Irons, the householders suffered damages to their residences on account of Hurricane Katrina. They signed a contingency payment 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 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 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 a much 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 better its charges can be an untenable outcome.
The Louisiana Courtroom of Enchantment affirmed the judgment of the District Courtroom, holding that the legislation agency’s privilege for contingency payment was superior to the mortgage holder’s curiosity as a further loss payee underneath the insurance policies. The court docket of attraction based mostly 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 lawyer at legislation might purchase as his payment 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 underneath 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 accommodates a loss payee clause, the mortgagee is contractually entitled to all the insurance coverage proceeds earlier than the mortgagor-owner or these claiming via the proprietor are entitled to get better any quantity.” The court docket based mostly its resolution totally on the next uncontested info, which might function a bright-line take a look at for these courts who adjudicate these claims:
- The householders have contingency payment 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 householders’ 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 difficulty.
As residential property injury 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 view to adjust to our moral obligations, we should problem these unjustified, unwarranted obstructionist ways 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. 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 Legislation.