The U.S. Court of Appeals for the Ninth Circuit has ruled that a bank was entitled to keep the insurance proceeds payable after its borrower's property had burned down, and it did not have to turn them over to him to rebuild.
|The Case
After Michael Music's property burned down, Bank of America ("BoA"), which had a lien on the property, received the insurance proceeds.
Because Mr. Music was in default on his loan, BoA refused to transfer the insurance proceeds to him for purposes of rebuilding, instead opting to credit the proceeds against the outstanding balance owed on the loan.
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