HLS 22RS-351 ORIGINAL
2022 Regular Session
HOUSE BILL NO. 1023
BY REPRESENTATIVES FARNUM, BOURRIAQUE, WILFORD CARTER, DAVIS,
GEYMANN, ROMERO, AND TARVER AND SENATOR STI NE
FINANCIAL INSTITUTIONS: Provides relative to the deposit and disbursement of
insurance proceeds
1 AN ACT
2To amend and reenact R.S. 6:337 and 338(A) and (B) and to enact R.S. 6:339, relative to
3insurance proceeds paid for damages to residential property; to provide for prompt
4endorsement; to require payment directly to claimants in certain circumstances; to require
5placement of settlement proceeds in an interest-bearing account for the benefit of the
6claimant; to provide for disbursement of funds; to provide for the determination of the
7relationship of proceeds to the property; to require release of funds upon inspection in certain
8circumstances; to provide for release of excess funds upon written request; to require a
9mortgage lender to create a disbursement plan; to provide for disbursement plan criteria; to
10provide for definitions; to provide for applicability; and to provide for related matters.
11Be it enacted by the Legislature of Louisiana:
12 Section 1. R.S. 6:337 and 338(A) and (B) are hereby amended and reenacted and
13R.S. 6:339 is hereby enacted to read as follows:
14 §337. Duty of secured party upon payment of insurance claim for damage to
15 mortgaged residential property; release of funds
16 A.(1) If payment in settlement of a damage claim on residential property in
17 which another person holds a mortgage is by check or draft, of an insurer, made
18 payable jointly to the claimant and the person holding the mortgage, then the person
19 holding the mortgage shall promptly endorse such check or draft.
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1 (2) such Such "settlement proceeds", as defined in Subsection C D of this
2 Section, which relate to compensation for damage to property or contents in which
3 the person holding the mortgage has a security interest shall be promptly placed in
4 an escrow account in accordance with the provisions of Subsection C of this Section
5 and shall earn interest payable to the claimant in accordance with the provisions of
6 Subsection C D of this Section.
7 (3) Insurance proceeds received by the person holding the mortgage that
8 relate to additional living expenses or attorney fees shall be promptly distributed to
9 the insured in accordance with the disbursement plan provided by R.S. 6:339. If the
10 person holding the mortgage cannot determine which part of the proceeds relates to
11 additional living expenses, contents insurance, or attorney fees, the insured shall
12 provide to the person holding the mortgage the insurance estimate provided by the
13 insurer which includes an itemized list of the settlement proceeds to be paid out by
14 the insurer, and the person holding the mortgage shall use such estimate to determine
15 which part of the proceeds relates to additional living expenses and contents
16 insurance.
17 (4) Nothing in this Subsection shall be construed to prohibit or prevent an
18 insurer from paying the insured directly for additional living expenses or paying the
19 insured directly for contents insurance coverage if the person holding the mortgage
20 does not have a security interest in the contents.
21 B.(1) When the damaged property is replaced or otherwise repaired to the
22 satisfaction of the claimant and the person holding the mortgage on the property,
23 then any remaining balance in the escrow account shall be paid to the claimant
24 together with all interest that accrued while the funds were in escrow. The person
25 holding the security interest in the property shall cooperate fully with the claimant
26 and the claimant's insurer in releasing funds, in accordance with the disbursement
27 plan provided by R.S. 6:339, in a timely manner within five business days by
28 traceable delivery to replace or repair the damaged property.
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1 (2) This Subsection shall not apply to claimants or property in default,
2 behind in payment, or in foreclosure.
3 C. The mortgage holder shall disburse settlement proceeds in accordance the
4 disbursement plan provided by R.S. 6:339, and release of the settlement funds shall
5 adhere to the following requirements:
6 (1) If the balance on the mortgage loan is less than or equal to fifty percent
7 of the original mortgage amount, the person holding the mortgage shall immediately
8 release the insurance settlement proceeds to the claimant.
9 (2) If the balance on the mortgage loan is greater than fifty percent but less
10 than seventy-five percent of the original mortgage amount, the person holding the
11 mortgage shall immediately release fifty percent of the insurance settlement proceeds
12 to the claimant and the remaining fifty percent of the proceeds shall be deposited into
13 an escrow account upon receipt and shall cooperate fully with the claimant and the
14 claimant's insurer in disbursing the funds.
15 (3) The person holding the mortgage shall release to the claimant upon
16 inspection the funds on deposit in an amount that is proportional to the percentage
17 of work that has been completed, and such inspection shall be completed within five
18 business days by the person holding the mortgage through either of the following:
19 (i) A site visit.
20 (ii) Submission via email of photo or video evidence showing repair
21 progress.
22 C.D. As used in this Section, the following terms have the following
23 meanings:
24 (a) "Attorney fees" means fees incurred before judgment and after judgment
25 if the judgment based on the number of hours reasonably expended on the dispute
26 multiplied by a reasonable hourly rate.
27 (b) "Living expenses" means funds paid on an insurance claim for expenses
28 incurred by the claimant as a result of the claimant being unable to live in a residence
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1 due to a covered loss. Such funds may be paid separately from or in combination
2 with other settlement proceeds.
3 (c) "settlement proceeds" "Settlement proceeds" means funds paid on an
4 insurance claim for damage to residential immovable property, living expenses, or
5 attorney fees as a result of Hurricane Katrina or Hurricane Rita, and where the funds
6 equal twenty-five thousand dollars or more.
7 E.(a) These funds The settlement proceeds shall be held in escrow by the
8 lender or loan servicer in accordance with the provisions of Subsection C of this
9 Section. Interest and interest shall accrue on settlement proceeds after being held in
10 escrow for more than thirty days.
11 (b) For purposes of this Subsection, compliance with Fannie Mae or Freddie
12 Mac servicing guidelines for payment of interest on property damage claim funds
13 held in escrow by the lender or loan servicer constitutes compliance with this
14 Section.
15 D. F. The provisions of this Section shall be applicable to state chartered
16 federally insured financial institutions and their affiliates to the same extent that such
17 provisions are applicable to federally chartered financial institutions.
18 G. Nothing in this Section shall be construed to limit or prohibit a person
19 holding a mortgage from offering a claimant more favorable terms or solutions than
20 those required by this Section.
21 §338. Insurance settlement proceeds; return of excess funds; enforcement
22 A. If a mortgage holder is presented with a jointly payable insurance
23 proceeds check or draft for residential immovable property damage resulting from
24 either Hurricane Katrina or Hurricane Rita, or both, which contains the mortgagor's
25 endorsement, and the mortgage holder receives a written request from the borrower
26 to release excess funds, then all mortgage holders shall have thirty days three days
27 after receiving such request and such check or draft to provide their endorsements
28 and return all excess funds provided for in Subsection B of this Section by traceable
29 delivery.
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1 B. The mortgage holder holding funds in escrow shall return to the
2 mortgagor all funds considered to be excess funds. For purposes of this Section, the
3 term "excess funds" shall mean insurance funds in excess of both of the following:
4 (1) All loan balances of any mortgage holder named as payee on the
5 insurance claim check or draft calculated as of the thirtieth day following receipt of
6 the request and check or draft as outlined in Subsection A of this Section; and.
7 (2) Six months of future accrued interest as calculated pursuant to the terms
8 of the mortgage loans and calculated from the date of the payoff explained in
9 Paragraph (B)(1) of this Section.
10 * * *
11 §339. Insurance proceeds disbursement plan
12 A. A mortgage lender doing business in this state shall have a policy,
13 hereinafter referred to as the "disbursement plan", outlining the process for
14 disbursement of settlement proceeds, as defined by R.S. 6:337, received from an
15 insurer as a result of a claim on property for which the mortgagee holds a mortgage.
16 A copy of the disbursement plan shall be signed by a mortgagor as part of the
17 mortgage application, and a copy shall be provided to the mortgagor upon request.
18 B. A plan for disbursement of settlement proceeds required pursuant to this
19 Section shall include the following:
20 (1) A provision providing for transferring to the claimant any interest earned
21 on settlement proceeds while in the possession of the mortgage holder.
22 (2) A process for how the claimant can contact the mortgage holder
23 regarding an insurance claim. Providing the claimant with contact information that
24 requires the claimant to interact with an automated system shall not constitute
25 compliance with this Paragraph.
26 (3) A provision stating that the portion of settlement proceeds which relate
27 to compensation for damage to property or contents in which the person holding the
28 mortgage has a security interest will be used for the repair of the damaged property.
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1 (4) A provision providing that no settlement proceeds will be used to make
2 payment toward the principal, interest, or fees associated with the mortgage, unless
3 the claimant requests such in writing.
4 (5) A process through which the claimant can appeal a decision of the
5 mortgage holder that is preventing or delaying the claimant from making repairs to
6 the property in a timely manner.
7 (6) A provision which states that the mortgage holder accepts and admits
8 liability for any damages caused by the mortgage holder's failure to disburse
9 settlement proceeds, if the mortgage holder withholds the settlement proceeds in bad
10 faith.
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 1023 Original 2022 Regular Session Farnum
Abstract: Provides for regulations regarding the deposit and disbursement of insurance
proceeds following damage to residential property when a mortgage holder has a
security interest in the damaged property.
Present law requires that when payment of an insurance check is by check or draft in
settlement of a property damage claim involving residential property in which another holds
a mortgage on the property is paid jointly to the claimant and the holder of the mortgage,
then such settlement proceeds are to be placed in an interest-bearing escrow account with
the interest accruing to the benefit of the claimant.
Proposed law retains present law and adds that the mortgage holder is required to promptly
endorse the check or draft and the proceeds to be deposited in an interest-bearing escrow
account are required to be related to compensation for property damage for which the
mortgage holder has an interest.
Proposed law requires proceeds relating to additional living expenses or attorney fees be
promptly distributed to the insured pursuant to the disbursement plan provided by proposed
law.
Proposed law requires the insured to provide the mortgage holder with the itemized
insurance estimate for use by the mortgage holder when the mortgage holder cannot
determine what portion of the proceeds relates to property in which the mortgage holder has
a security interest and what portion of the proceeds relates to living expenses, contents
insurance, or attorney fees.
Proposed law provides that the provisions of present law and proposed law shall not be
construed to prohibit or prevent an insurer from directly paying the insured for living
expenses or contents coverage for the portion of proceeds not related to property in which
the mortgage holder has a security interest.
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HB NO. 1023
Present law requires the mortgage holder to cooperate fully with the claimant and his insurer
in releasing funds in a timely manner for such replacement or repair of the damaged
property.
Proposed law repeals the present law provision that the claimant be paid after satisfactory
completion of the replacement or repair of the damaged property.
Proposed law retains the present law requirement that the mortgage holder cooperate fully
with the claimant and his insurer in releasing the funds, but adds that the funds are required
to be released according to the disbursement plan in accordance with proposed law within
five business days by traceable delivery to replace or repair the damaged property.
Proposed law provides that the provisions of present law and proposed law regarding the
disbursement of settlement proceeds shall not apply to claimants or property in default,
behind in payment, or in foreclosure.
Proposed law requires a mortgage holder to disburse settlement proceeds according to the
disbursement plan the mortgage holder is required to create in accordance with proposed law
and further requires the funds to be released in accordance with the following requirements:
(1)The mortgage holder is required to immediately release the settlement proceeds to
the claimant when the balance on the mortgage is less than or equal to 50% of the
original mortgage amount.
(2)The mortgage holder is required to immediately release 50% of the settlement
proceeds to the claimant and deposit the remaining 50% in an escrow account upon
receipt when disbursing the funds when the balance on the mortgage is more than
50% but less than 75% of the original mortgage amount.
(3)The mortgage holder is required to release to the claimant, upon inspection, the funds
on deposit in an amount that is proportional to the percentage of work that has been
completed and requires that the inspection be completed by a site visit or email
submission of photo or video evidence showing repair progress within five business
days.
Proposed law defines "attorney fees" and "living expenses".
Present law defines "settlement proceeds".
Proposed law changes the definition of "settlement proceeds" to include living expenses and
attorney fees and repeals the present law provision that settlement proceeds apply only to
funds paid as a result of Hurricanes Katrina or Rita.
Proposed law provides that the provisions of present law and proposed law shall not be
construed to prohibit a mortgage holder from offering more favorable terms or conditions
than those provided by present law and proposed law to a claimant.
Present law provides that a mortgage holder who is presented with a jointly payable
insurance proceeds by check or draft for residential immovable property damage resulting
from Hurricanes Katrina or Rita, or both, is required to endorse and release excess funds
from the insurance proceeds to the borrower within 30 days of written request for release of
the excess funds by the borrower.
Proposed law retains present law, but repeals the requirement that the proceeds be from
damage resulting from Hurricanes Katrina or Rita and adds the requirement that the funds
be returned by traceable delivery.
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Present law defines "excess funds".
Proposed law retains present law.
Proposed law provides that a mortgage lender doing business in this state shall have a plan
outlining the process for disbursement of settlement proceeds received from an insurer as
a result of a claim on property for which the mortgagee holds a mortgage.
Proposed law provides that a copy of the insurance claim proceeds disbursement plan shall
be signed by a mortgagor as part of the mortgage application. Proposed law further provides
that a copy of the plan shall be provided to the mortgagor upon request for such.
Proposed law provides that a plan for disbursement of settlement proceeds required pursuant
to proposed law shall include the following:
(1)A provision providing for the transfer of any interest earned on settlement proceeds
while in the possession of the mortgage holder.
(2)A process for contacting the mortgage holder regarding an insurance claim.
Providing the claimant with contact information that requires him to interact with an
automated system does not constitute compliance with this provision.
(3)A provision providing that the portion of settlement proceeds relating to
compensation for damage to property or contents in which the mortgage holder has
a security interest will be used for the repair of the damaged property.
(4)A provision providing that settlement proceeds will not be used to make payment
toward the principal, interest, or fees associated with the mortgage, unless the
claimant requests such in writing.
(5)A process through which the claimant can appeal a decision of the mortgage holder
that is preventing or delaying the claimant from making repairs to the property in a
timely manner.
(6)A provision wherein the mortgage holder accepts and admits liability for any
damages caused by the mortgage holder's failure to disburse settlement proceeds, if
the mortgage holder withholds the proceeds in bad faith.
(Amends R.S. 6:337 and 338(A) and (B); Adds R.S. 6:339)
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