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Has Your Mortgage Lender Caused Your Homeowners Insurance To Lapse?

Most homeowners escrow the insurance premium for their homeowners insurance.  Under this arrangement, the homeowner’s mortgage lender bills the homeowner each month for the principal and interest owed on the mortgage, as well as the amount owed for the monthly insurance premium to insure the home.  In doing so, the mortgage lender agrees to timely pay the homeowner’s insurance company so that the home remains covered in case of a loss.

Unfortunately, lenders sometimes make mistakes and fail to remit the homeowner’s insurance premium to the insurance company.  Failing to timely pay the insurer can lead to the homeowner becoming uninsured for a period of time. Given that many Florida homes are at high risk for sustaining hurricane damage, the possibility of being uninsured, even for short amounts of time, creates considerable risk for the homeowner.

Florida law provides protections for homeowners who become uninsured or underinsured due to the negligence of their mortgage lender.  Florida Statute § 501.137(3)(a) provides:

If the lender, as a result of neglect, fails to pay any tax or insurance premium when the tax or premium is due and there are sufficient escrow funds on deposit too pay the tax or premium, and if the property owner suffers a loss as a result of this failure, then the lender is liable for the loss; except, however, that with respect to any loss which would otherwise have been insured, the extent of the liability shall not exceed the coverage limits of any insurance policy which has lapsed. 

Section 501.137 provides homeowners with a right to sue lenders who harm a borrower due to the lender’s failure to pay insurance premium.  The statute goes even further, however, and provides homeowners with an opportunity to recover attorney’s fees in certain circumstances for violating section 501.137’s requirements.  Fee provisions like this provide homeowners with access to the court system as many homeowners simply cannot afford to retain counsel to represent them in disputes with their lender.


Jason Cornell is a Florida attorney who represents homeowners with lender liability claims.  You can reach Jason at 561 616-3333 or jcornell@liggiolaw.com.

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