Residential property harm attorneys who symbolize policyholders for any size of time will ultimately 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 struggle to make the Policyholder complete is way from over. Whereas it has proved tough in recent times 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 offered the mortgage holder with the entire 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. Nevertheless, 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 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 symbolize 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 look like a joke, however I promise you it’s not. A survey of the opposite places of work 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 undoubtedly was not coated on the Bar examination – frightening a concursus continuing. For the uninitiated, a “concursus continuing is one wherein 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 Curiously, the verbiage used within the analysis is {that a} litigant doesn’t “file” a concursus continuing, a litigant provokes one.
Because of 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 householders suffered damages to their residences on account of Hurricane Katrina. They signed a contingency price contract with a hurricane declare legal professional and had been profitable in recovering further insurance coverage proceeds. The insurance coverage firms made the settlement checks payable to the house 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 house owner’s and the insured house 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 house 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 end result.
The Louisiana Court docket of Enchantment affirmed the judgment of the District Court docket, holding that the legislation agency’s privilege for contingency price was superior to the mortgage holder’s curiosity as an extra loss payee underneath 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 consumer, an legal professional at legislation 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 underneath Chapter 9 of the Louisiana Industrial 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 the entire insurance coverage proceeds earlier than the mortgagor-owner or these claiming via the proprietor are entitled to get well any quantity.” The courtroom primarily based its choice totally on the next uncontested info, which might function a bright-line check for these courts who adjudicate these claims:
- The householders have contingency price 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 householders’ insurance coverage firms;
- The insurance coverage firms have made the settlement checks payable to the house 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 difficulty.
As residential property harm attorneys and hurricane claims attorneys who symbolize policyholders, our advocacy can not finish with a positive settlement or verdict in opposition to the insurance coverage firm. With the intention 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 shoppers and to the attorneys whose laborious 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. 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.
