Residential property harm attorneys who signify policyholders for any size of time will ultimately come to the conclusion 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 struggle to make the Policyholder entire 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 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 residence or displaced from their residence.
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. Nonetheless, this mortgage holder explicitly acknowledged that even when we recommend the examine 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 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 may occasionally look like a joke, however I promise you it isn’t. A survey of the opposite places of work in our agency revealed among the identical difficulties with the mortgage holders.
I had an epiphany. I recalled a not often 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 during 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.
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 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 extra 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 could be an untenable consequence.
The Louisiana Court docket of Enchantment 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 below 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 legal professional at legislation might purchase as his charge 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 below Chapter 9 of the Louisiana Industrial legal guidelines.
The courtroom particularly rejected US Financial institution’s meritless claims that “when an insurance coverage coverage comprises 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 well any quantity.” The courtroom primarily based its determination totally on the next uncontested information, 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 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 signify policyholders, our advocacy can not finish with a good settlement or verdict in opposition to 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 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 comply with.
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 Legislation.
