Can an insurer legally redirect payment toan auto finance company instead of sending it to the policy holder if the loan is in default?

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Can an insurer legally redirect payment toan auto finance company instead of sending it to the policy holder if the loan is in default?

I had an accident in my vehicle, for which I’ve fallen behind on the monthly payments. The insurance adjusters have given me a settlement amount but said they needed to speak to the finance company before releasing the payout. Are they required to, or can they, legally redirect the payment to the finance company instead of paying it to me?

Asked on April 22, 2011 under Accident Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

This is a contractual issue--it depends on what  the policy states, who is listed as a payee, etc. For a definitive answer, you need an attorney to review the insurance policy and all endorsements, etc. amending, affecting, etc. the policy (and also it would be good to review the financing agreement as well).

However, it doesn't really matter in a larger sense. Say that they pay you instead of the financing company; you, however, have to pay the financing company, to pay off any outstanding balance. If you don't you can be sued (and also have your credit rating damaged)--at the end of the day, unless you're planning to try and "stiff" the financing company and take the consequences, you will get the same amount of cash in your pocket whether the check is written to you and you pay the financing company, or first the financing company gets their share and then remits any remaining amount to you.


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