Insurance Claim Question

[frivhorn]

Our home, like many others in the Austin area, took a beating from the hail storm at the end of March. Since then we've been going back and forth with our insurance company to get an accurate adjustor's report. We were finally able to settle that mess and received our check accordingly.

However, the check was cut such that it had to be signed by both our mortgage lender and us. We call our lender and they tell us to mail them the unsigned checks for signature and return... which we do. However, instead of receiving the authorized checks yesterday we receive a letter requesting notification when the work is completed, at which point the lender will release the funds upon certain conditions. In addition, the letter states that the lender will require a final inspection after the work is completed and that it is to be paid for by our insurance funds.

My questions - where is the best place to research to see if the conditions stated in the letter have any basis? Most of our neighbors have already received their checks. Also, the insurance adjustor's report of course did not include money for a final inspection, so why should we be expected to cover this inspection out of our own pocket when it is the lender who is requiring it?

 

[AustinTejasFan]

Mortgage clause in your policy says claims will be paid to mortgagee "as interests appear". That's why they're included on claim check. Your neighbor whose ins company didn't do this has violated the contract.

Tx Ins Code

§ 557.002. NOTIFICATION BY LENDER TO INSURED CONCERNING
INSURANCE PROCEEDS. (a) If a claim under an insurance policy for damage to residential real property is paid to the insured and a
lender, and the lender holds all or part of the proceeds from the
insurance claim payment pending completion of all or part of the
repairs to the property, the lender shall notify the insured of each
requirement with which the insured must comply for the lender to
release the insurance proceeds.
(b) The notice required under this section must be provided
not later than the 10th day after the date the lender receives
payment of the insurance proceeds.

Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.

§ 557.003. LENDER'S RELEASE OR REFUSAL TO RELEASE
INSURANCE PROCEEDS. Not later than the 10th day after the date a lender receives from the insured a request for release of all or part of the insurance proceeds held by the lender, the lender shall:
(1) if the lender has received sufficient evidence of
the insured's compliance with the requirements specified by the
lender under Section 557.002 for release of the proceeds, release
to the insured, as requested, all or part of the proceeds; or
(2) provide notice to the insured that explains
specifically:
(A) the reason for the lender's refusal to
release the proceeds to the insured; and
(B) each requirement with which the insured must
comply for the lender to release the proceeds.

Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.

 

[NickDanger]

I don't think they can require you to pay for the inspection. Tell them they are welcome to send someone out of their own choosing, but you aren't going to pay for it. They will probably back down. Since they don't have to do an inspection at all if they don't want to, they could easily take your roofer's word for it if they want to. They have a right to withhold "some" of the money until completion of repairs, but only the amount over the depreciated value in most circumstances. I can't remember if an exception is made for roofs.

 

[Bookman]

Check your note and deed of trust.

 

[NCAAFBALLROX]

Introductory apology: The large photo is because I usually upload these for my own personal use & wasn't intending to place it on HF.Frivhorn,I see you're in the "sub 25 posts club"... welcome to HF.

I'm a roofing contractor & what you're describing isn't that uncommon. I will guess that around 10% of my customers have this sort of adjustment process & often, I find that it's dependent upon the total value of the claim, i.e. $ 10,000.00 or more.

As it is, your mortgage co. has put you in a difficult spot because most customers need that 1st check from insurance to provide a deposit to the roofing contractor. I know that in my case I need one to purchase the parts; I'm a smaller operation, so I don't have the available cash buffer to wait on a 3 week delay after completion before I can collect any funds.

What you need to do is get in contact personally & strike up a relationship* with someone @ the mortgage co. Explain your situation & ask that they release a check made payable to the supply house for the dollars needed to purchase parts.

The contractor can then proceed (unless they want the check made out to them, which your financing organization probably won't have a problem with). What I'm mentioning here is that there isn't any markup in the parts I purchase, even if there is some kind of negotiated upgrade in the components we install.

The next thing you need is for the contractor to instantly send off an invoice to the insurer so that they can turn around a depreciation check. Unfortunately, this is probably going to have the insurance co. kick out a check that is again requiring 2 party endorsement. This is adding an additional delay to the contractor getting their final check, so you should for sure explain this up front, that there is going to be an extra hoop or two to leap through & the delays are going to be a headache.

The reason that the mortgage co. makes you provide documentation & proof that the roof work has been done is because technically, THEY have the over-riding interest in the property & it is in their best interest to make sure you actually get the work done to properly maintain THEIR property.

Additionally, the mortgagor wants to make sure that you don't get an insurance payout for X dollars & instead find a cheap out of town storm-chaser who will 'cut you a deal' & save you a thousand on the deductible while using crappy products, crappy methods, or a combination of both. In the end, they want the best products & the best work so that their house will be in good shape should you somehow default on the mortgage & they have to repo the property & resell.

As to the inspection requirement, ask this person @ the mortgage co. exactly what it is they have in mind. Do they want a real estate inspector, are they looking for a 3rd party roofer, or do they provide their own field inspector? I also agree that @ no point should they ever expect this to come out of YOUR pocket.

Please keep in mind that The State of Texas does NOT regulate roofing as an occupational trade & your mortgage co. may not be aware of this.

This also means that while some items are not considered a requirement to install on your roof & there are some 'minimum standards', there is also a way to install the components on your roof (& a list of components themselves) that are more in line with "best practices". I actually did an inspection last Thursday for a lawyer who posts here on HF; his client had a roof with some issues that didn't show any problems until very recently & if the most recent roof (only the 2nd since construction in '85) was installed using "best practices", then we absolutely wouldn't be having this conversation about what may or may not have been the responsibility of the most recent roofer.

Example:

.com/albums/s153/RanchHandRoofing/Project%20Photos/2009/2009%20Herlihy%20for%20Newsome/2009NewsomeInspectionforSSJMLaw13.jpg">

It is my conjecture that the plywood deck shown is delaminating or suffering from 'glue separation', or maybe even an improper decking cut was to blame. Even a 1/8" over-sized piece of decking can be stuffed into position & then nailed down. Give it a 1/4 century & eventual expansion & contraction will take it's toll. If the recent roofer had installed metal drip edge, then I wouldn't have been called in. The idea here is that while drip edge is suggested in 99.9% of all applications, it's not a requirement to have it in there.

I also found a couple of other deficiencies, however these are more easily corrected & the decking photo shown is a much larger issue.

...OK, so I seem to have gone a touch off course. It's late & I tend to ramble when posting @ this hour.

I hope this has assisted you in your questions.

*Remember, you always catch more flies with honey than salt. The person you get on the phone is really just interested in getting through the pile of paperwork on their desk without being fired. They are most interested going home @ the end of the day, not getting chewed out by an angry mortgagee.

 

[AustinTejasFan]

"who will 'cut you a deal' & save you a thousand on the deductible"

If the contractor offers to pay or rebate your deductible or pay you an amount equal to your deductible to let him put a sign in your yard, it's insurance fraud. If your deductible is $1,500 or more, it's a felony.

Penal Code The Link
Business & Commerce Code The Link