Dozens of people who owned condominiums in the building that collapsed in Surfside, Florida, fear that if they cash early insurance checks, they might jeopardize future payments, a state senator told the judge overseeing lawsuits from the disaster.
It is the latest wrinkle in the long legal battle facing survivors of the June 24 collapse.
Florida state Sen. Jason Pizzo told 11th Circuit Court Judge Michael A. Hanzman on Wednesday that he is asking condo insurance companies to make a definitive statement to victims that they can cash their checks without compromising their future rights to collections claims, or their place in line to recover damages.
Pizzo told USA TODAY that at least 25 condo survivors have approached his office. The question is related to a legal a process called subrogation in which insurance companies can seize future payments to policyholders to reimburse themselves for having paid a claim. That means payments from court settlements, or any other party held responsible for the collapse, could be diverted from the condo owners to the insurance companies.
“They're afraid to deposit the check because they don't know if they are subrogating their rights to the insurance company to collect perhaps a much larger number,” Pizzo said.
Tasha Carter, a Florida insurance consumer advocate, told USA TODAY that the families and survivors want to be assured that their right to collect additional compensation in the future will not be compromised if they accept payments now.
For example, if a condo owner accepts $100,000 from his insurance company now and then defendants in lawsuits later pay out another $100,000 to each condo owner, it's possible under subrogation that the insurer could claim that additional money.
“These owners are concerned that if they accept the money, that means that they're turning in their rights to collect,” Pizzo said.
David Paige, an expert witness for the insurance industry, said insurers usually try to recover only the amount they paid out in the first place.
“Subrogation in the world of insurance, they basically go after whatever they paid,” Page said.
David L. Stegall, an insurance expert in Alabama, said that after the insurance company pays out claims, it will likely subrogate against anyone it can find to be liable, such as people who worked on the building, designed it or inspected it.
“The real lawsuits and stuff are going to come into: ‘Why did this happen? Who was negligent in this occurrence happening?’” Stegall said. “They’re going to try to find somebody who was negligent, and they’ll probably name every possible person you can think of.”
Thomas Graham of the Miami Dade Bar Association said he has been recruiting volunteer attorneys from across the state to give legal advice to Surfside families on questions related to property insurance and probate law.
Graham said some insurance companies have been sending out payments to show they are not acting in bad faith, and cashing the checks should be fine. But he cautioned that every policy is different and each situation should be reviewed thoroughly.
“We’re eager to help out as much as we can given the gravity of the situation,” Graham said.
Families also could face a problem with their mortgage holders, Carter said.
“In this particular case, when a mortgage does exist on one of the condo units, the insurance company would make that check payable to the mortgage company and to the condo unit owner,” Carter said.
“And what's happening is because the unit no longer exists and there is an outstanding balance on the mortgage loan, we've run into some instances where the mortgage company is wanting to use the bulk of the insurance proceeds to pay off the remaining mortgage, which can leave the homeowner without enough funds to be able to move forward, find new housing and rebuild their lives.”
She says survivors want mortgage companies to be flexible and work with them so they can use a portion of that money for a new residence.
Collapse survivor Steve Rosenthal had a policy for $92,000 to cover the cost of potential repairs inside his unit. When the insurer issued the check, it was made out to him and his mortgage company.
For weeks he went back and forth with the mortgage company's legal department. On July 28, the company said it would sign over the check for him to deposit.
"In my situation there's nothing to rehab; there's no kitchen to fix, there's no bathroom to fix," Rosenthal said. "The building was imploded."
This article originally appeared on USA TODAY: Surfside condo collapse victims fear cashing early insurance checks