Foreclosure Changes Insurable Interest from Borrower to Lender
Barry Zalma
Dec 12, 2023
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Post 4787
In this contested residential mortgage foreclosure, defendants Mitchell and Deanna Minchello appealed from the entry of summary judgment. Defendants contended that plaintiff violated the covenant of good faith and fair dealing by “refusing to disburse defendants’ insurance proceeds and forcing defendants’ home to remain in disrepair” and that the trial court applied an improper standard.
In Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust, as owner trustee of the Residential Credit Opportunities Trust V v. Mitchell Minchello and Deanna Minchello, and J Hofert Company, FIA Card Services NA, Schumann Hanlon LLC, Discover Bank, Vanz LLC-December 10 Series01, Mri-West Morris Associates, and State Of New Jersey, No. A-3522-21, Superior Court of New Jersey, Appellate Division (December 8, 2023) the issues were resolved.
FACTS
The essential facts were undisputed. Defendants borrowed $522,000 in January 2007, secured by a thirty-year purchase money mortgage on their home in Mt. Arlington. Defendants stopped making their loan payments in 2010, and in 2012 they stopped paying the taxes and insurance on the property. In 2014 the lenders asserted its rights by suing for foreclosure in March 2015.
Defendants filed a bankruptcy petition under Chapter 13. The following day, December 7, defendant Deanna Minchello drove her car into defendants’ home, resulting in structural damage. The only insurance was forced placed insurance in the name of the lender.
ANALYSIS
The trial judge granted plaintiff’s motion for summary judgment. The judge found no dispute over the validity of the note and mortgage, defendants’ default in 2010 and plaintiff’s standing to foreclose the mortgage. Whether the lender allowed the insurance money to go to repair the structure was irrelevant since the foreclosure put the insurable interest in the lender and the lender was the only person insured.
Although the procedural history is long and complicated with the parties’ appendices exceeding 800 pages, the legal issues are straightforward, and the Court of Appeals had no hesitation in holding plaintiff established its entitlement to both summary judgment.
CONCLUSION
The trial court’s orders that plaintiff established its right to foreclose the mortgage, that defendants did not succeed in establishing plaintiff should be barred from asserting that equitable remedy, and that final judgment of foreclosure was properly entered against defendants.
ZALMA OPINION
When borrowers fail to pay mortgage payments, insurance premiums and taxes they have no insurance in their name, only the insurance acquired by the lender to protect its interests. The lender can apply the insurance to repair or simply apply it to reduce the debt. It took unmitigated gall to sue the lenders in this after defaulting in every obligation owed by a property owner that pledged the property as security for the loan. The court found it necessary to read and analyze all 800 pages and still found the trial court’s judgment in favor of the lender to be appropriate. Why the court did not sanction the borrowers and their attorneys is confusing to me.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Chutzpah: After Criminal Prosecution Defendant Sues USA
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Dr. Segun Patrick Adeoye, a medical doctor, filed a lawsuit against the United States of America, seeking damages for alleged violations during his criminal prosecution. He was acquitted by a jury but claims to have suffered significant harm, including financial losses, damage to his professional reputation, and personal distress.
In Dr. Segun Patrick Adeoye v. The United States Of America, Civil Action No. 4:25-cv-83, United States District Court, E.D. Texas, Sherman Division (July 23, 2025) the USDC dismissed Adeoye’s suit.
FACTUAL BACKGROUND
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Post 5163
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FACTS
After Menchaca retained counsel HAIC advised that, under the terms of the policy, Menchaca was required to first invoke the appraisal process prior to filing suit, and that HAIC reserved the right to request that Menchaca and any adjuster hired on his behalf submit to an Examination Under Oath (“EUO”).
On August 23, 2018, Menchaca’s counsel ...
Payment of Appraisal Award Defeats Claim of Bad Faith
Post 5163
Read the full article at https://lnkd.in/dNpKKcYx, see the full video at https://lnkd.in/dNgwRP8q and at https://lnkd.in/dA9dvd-D, and at https://zalma.com/blog plus more than 5150 posts.
Hurricane Damage to Dwelling Established by Appraisal Award
In Homeowners Of America Insurance Company v. Emilio Menchaca, No. 01-23-00633-CV, Court of Appeals of Texas, First District (July 31, 2025) after a hurricane Homeowners of America Insurance Company (“HAIC”) estimated that the cost of covered repair to Menchaca’s house was $3,688.54, which was less than his deductible, and therefore no payment would be made.
FACTS
After Menchaca retained counsel HAIC advised that, under the terms of the policy, Menchaca was required to first invoke the appraisal process prior to filing suit, and that HAIC reserved the right to request that Menchaca and any adjuster hired on his behalf submit to an Examination Under Oath (“EUO”).
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Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
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ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
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Professional Health Care Services Exclusion Effective
Post 5073
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Insurance Coverage Dispute:
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