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 Posted: Fri Sep 30, 2011 9:54 am Post subject: Laws protecting the rights of lien holder |
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I’m an employee of an auto finance company and I’m having trouble with an insurance company.
They do not want to issue a two party check with our company and customer on the check instead wants to place a body shop and the customer on the check, but we don’t trust the body shop.
What laws in the state of Texas protect us? We want the check payable to us and the customer that way we can make sure the repairs are done properly and no further damage is done. Please advice!
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Joe Adams
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| Posted: Fri Sep 30, 2011 11:21 am Post subject: |
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| Quote: | | We want the check payable to us and the customer that way we can make sure the repairs are done properly and no further damage is done. |
What you want and what you get are governed under contract law, not insurance law. Is your company even listed as an "additional insured" as it should be on the registered owner's insurance?
What does your contract with the borrower entitle your company to do? Do you have the contractual right to dictate what repair shop the borrower uses? Probably not. Does the borrower's insurance contract require that the lender's name appear on the check to pay for repairs at the body shop? Probably not.
Your contract entitles your company to recover the full cost of the money borrowed to purchase the vehicle. Principal and interest. It allows you to purchase collision coverage and charge the borrower for that, to protect your financial interest in the vehicle, if the borrower does not. It probably does not specify that you have the right to determine what repair shop the borrower uses to make the necessary repairs to the vehicle.
| Quote: | | but we don’t trust the body shop. |
Are they a licensed repair facility? If they are, you have no right, unless stated in your purchase contract, to force any change. At best, your contract may require the borrower to keep the vehicle in running condition. The repairs you are concerned about will do that.
Your only interest is the value of your contract. If the vehicle were totalled, then the check would have your company's name on it. And if it wasn't enough to pay off the loan, you would still have the legal right to collect the difference from the borrower.
So consult your contract and see what your "rights" are under Texas contract law.
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Last edited by MaxHerr on Fri Sep 30, 2011 2:01 pm |
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MaxHerr
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| Posted: Fri Sep 30, 2011 12:55 pm Post subject: |
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You don't mention if it's a 1st or 3rd party claim. I'm guessing it's a 1st part claim and usually the insurance company has no obligation to a lien holder on a 3rd party claim. If your company is listed as a lien holder than speak to the adjusters supervisor and explain that they have an obligation to protect the lien holder by putting their name on the check. Let the supervisor know your concerns about the shop and explain if the repairs are not done 100% and done 100% correctly that your company will be coming back for an additional payment. If they don't agree to put your name on he check, send this same info to them in writing.
You can't make them put your name on the check but you can hold them responsible and in-force your rights.
State laws do give you certain rights when named as a lien holder. The insurance company is obligated to protect your rights. While 99.9999% of the time lien holders don't mind the body shop being put on the check I see no reason why the insurance company would not put the lien holders name on the check if requested. It's n skin off their noses. They would simply be doing the right (and legal) thing. |
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tcope
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| Posted: Sat Oct 01, 2011 4:37 am Post subject: |
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Thanks for the information max/tcope.
It is a 1st party claim and we are enlisted as additional insured until the title is owned by the customer.
So, we can hope to have our name on the check, if we send them a written application, stating it'll be the legal thing to do.
But what if they still don't agree? Can we take any legal step against them? thanks again
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Joe Adams
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| Posted: Sat Oct 01, 2011 4:42 am Post subject: |
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Are you sure you are listed as an additional insured and not just a lien holder? In any case an AI status would not help you... listed as a lien holder would.
You can legal steps if you've suffered damages. So far you have none.
You _can_ (and probably should) file a complaint with your states Dept of Insurance. |
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tcope
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| Posted: Sat Oct 01, 2011 7:38 pm Post subject: |
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Interfering with the insured's right to choose a repair facility could end up costing you far more than the amount of the repair.That is, unless your right to determine a repair facility is in your loan contract with the debtor. I doubt that it is.
As long as the person who is responsible for making payments on his loan continues to make those payments on time, you have no real legal standing here, because, as tcope has said, you have no damages. He is fulfilling his only obligation to you.
If you prevent the debtor from using his preferred repair shop, he may fairly argue that the responsibility for any additional expense to repair the vehicle not covered by insurance will be yours, not his. And he would probably win a civil suit on that claim. Additionally, if this causes a delay to the repairs -- having to send the vehicle to another facility -- or the repairs made by your vendor are shoddy, you're going to be in a position to have to reimburse the debtor for his lost time or other expense.
I don't see that you will gain anything by interfering in a process that is apparently successfully underway. Just back off and continue to collect your loan payments and be satisfied. From my perspective, you're acting like the proverbial "meddling mother-in-law".
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