We have a homeowner whose claim is being investigated. The house blew up, fire, and partially collapsed. This happened in June of this year. The fire report deemed the cause was undetermined.

The insurance company hired a company to disassemble the house in August to find the water heater in the basement to see if it was the cause of the explosion and fire. After retrieving the water heater (still not the cause of the fire), they didn't make any effort to clean up the property.

After several attempts from our company and the homeowner to have the insurance company clean up the mess they made, the homeowner hired a company in October who produced an estimate for $14,000.00 to demolish the house.

The insurance company approved the $14,000.00 invoice and just sent out a check for $6,500.00 ACV payment ($7,000 minus the $500.00 deductible). The check included the mortgage company's name on it.

 My question is this:

1.Why does the mortgage company's name have to be on the check?

2.Why are they only making an ACV payment on demolition?

The demolition company now has to wait for the check to go through the mortgage company and back to them to get started on the job with half of the money.

This process will have to be repeated once the job is completed to get the depreciation money. Your thoughts? No other payment on this has been paid, as it is still under investigation.   

Indiana Subscriber

In looking at the HO 00 03, debris removal is included in the liability limits for the property. Under the loss settlement provisions, the policy states that ACV will be paid first and the rest paid when repair/replacement is complete. The mortgage clause states that any loss paid under coverages A and B will be paid to the mortgagee and the insured. They're following the policy to the letter. I agree it's awkward for the debris removal company, and it makes sense that that could be paid at once since it's only part of the loss, but I can't explain why they're doing it the way they are other than that it strictly follows policy language.

Editor's note: 

An observant reader pointed out that debris removal is coverage D, and while related to coverage A has nothing to do with the mortgagee clause and the mortgagee should not be on the debris removal check.

Likewise, the ACV clause pertains to coverage A and B, and not the other coverages, so the total debris removal amount should have been paid. We apologize for the temporary lapse in accuracy.

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