Lender placed insurance Glenda Mahoney asked 9 months ago
Lender placed insurance

No local insurance company will insure my home because it was built on stilts in 1996, it is a Jim Walters home. Because I can’t get a company to insure my home the mortgage company has placed lender placed insurance on the home. The mortgage company is Shellpoint, which took over Dietch went it filed bankruptcy. I have tried many times since the last insurance was placed on my home to get the details about the policy. Neither the mortgage company nor the insurance company, which is Proctor Financial, will give me any details about my policy. They have told me that they can’t even tell me what any of my deductibles will be or what kind of coverage I have. They will not give me any details about anything on the policy, therefore I don’t even know what kind of coverage I have. I have been told that before I can even know my deductible that I would have to file a claim. In June 2023 I did have to file a claim for water damage. They sent an adjuster out here, which did not do any kind of water detection along the floors or wall. About a week after I filed the claim I checked on it and was told that it had paid the claim and that a check was sent to the mortgage company less my deductible. I don’t know how they could pay a claim without a contractor’s estimate on the damage. I was told they had paid just a little over $4000.00. When I was told this I told the lady that I didn’t know how they can pay a claim without knowing what all was damaged from the busted hot water heater inlet pipe. I then asked if the contractor found additional damage if he could file a claim for the additional cost and I was told they would not pay anything more than what they had already sent to the mortgage company. Is this legal and can they deny paying the entire cost of repairing the water damage that has occurred in 5 rooms due to the flooding?

2 Answers
Answer for Lender placed insurance United Policyholders Staff answered 8 months ago

The following answer comes from the Oklahoma Insurance Department:

“The issue of receiving information from the insurance company on what coverages might be in place on the property is not unusual. There are no Oklahoma laws that specifically address forced-placed coverage and it is noted that the owner of the policy is the mortgage company not the homeowner. The mortgage company can only insure the structure for what is owed on the loan and there is not liability coverage, coverage of contents or any other coverages typically found in a homeowner’s policy. The mortgage company does not have an insurable interest in those items.

In those circumstances where the Department sees forced-placed coverage, typically with flood coverages, we note that at least a copy of the policy or a declarations sheet is given to the property owner either by the mortgage company or the carrier.

Finding coverage: If a ‘standard’ homeowner’s policy cannot be obtained from a P&C carrier there is always the possibility of going to the surplus lines market and shopping for one. This may require the consumer to work with an agent/broker who can place coverage with a surplus lines carrier. Also the consumer can go through the OK-MAP (Market Assistance Program) and determine if coverage can be issued. I have attached information on this program and, if interested, details can be found at https://mapsprogram.com . This is a statutory approved outlet for homeowners that have difficulty getting coverage (see 36 O.S. 6411).

The claim issue: The homeowner policy is not owned by the consumer; the mortgage company owns it. Regardless of who owns the policy the insurance carrier is required to put the house back to its original condition up to policy limits. In the absence of being able to review the policy there is no way to determine policy limits. Our Consumer Assistance can open an inquiry on this matter if that is agreeable to the consumer.

We will be happy to assist this consumer. Notwithstanding the claim issue the best way out of this situation is to find coverage that will protect the consumer with a standard HO policy.

Mike Rhoads, Deputy Commissioner – Consumer Assistance, OID” (https://www.oid.ok.gov/contact-us/)

Answer for Lender placed insurance United Policyholders Staff answered 8 months ago

The following answer comes from Alice Young, an Oklahoma Public Insurance Adjuster and long time UP volunteer:

“This is an unfortunate situation. Force placed policies tend to be frustrating to work with because the named insured is technically your home. While everyone’s situation is different, typically, the coverage is for the structure only and for the amount of your mortgage balance. I recommend you work with an agent to put a “contents only” policy in place on your contents since you cannot get your home structure insured.

It sounds like you have done a lot of work on your claim so far. Some of these things you may have already done. Insurance companies do have to respond to reasonable requests in writing. If so far you have only been communicating by phone I would suggest you send a very specific letter directly to the insurance carrier and send a copy to your mortgage company. In that letter request a copy of your policy and the estimate that the insurance company paid on. Send that letter by certified mail.

Contact your mortgage company to find out what they did with the money that was sent to them. You can request a loan payoff statement to see if they applied the amount to your loan. If they did not you can contact the mortgage company’s “loss draft department” to see if the funds are there. The loss draft department typically holds the funds and distributes payments to contractors as you submit the invoices.

The insurance company can pay the amount that they deem as damages even without a contractor estimate and that is what the adjuster was assessing when they came out. Even though the insurance company stated they will not consider more damage. I would suggest getting a contractor estimate that you think fairly documents the loss. Submit that to the insurance company and also include your mortgage company. In the letter explain that they amount they allotted for the damages were not sufficient and you are asking them to review the contractor estimate and have a reinspection.

The most important thing you can do is put every request and all communication in writing. If you continue to have issues you will have documentation that you can provide to a complaint with the Insurance Commissioner.”