What liability is my mortgage company under for failure to pay home insurance?

UPDATED: Oct 1, 2022

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What liability is my mortgage company under for failure to pay home insurance?

I have an FHA loan and therefore an escrow. However, my mortgage company failed to pay the home insurance for the year this month and the policy was canceled. The policy I had is no longer offered and a new policy at the lowest rate will cost $700 more a year, significantly increasing my monthly payment. Also, during the period I was not insured because of the failure of my mortgage company to

make their payment, my roof developed a leak, which creates concerns as to my roof being covered by any future insurance. What is the liability they have here?

Asked on August 28, 2017 under Real Estate Law, Georgia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

Assuming that you can show that the mortgage company was at fault, as you evidently believe you can (e.g. since the insurer did in fact have the right billing, etc. information), they would be liable for the costs or losses provably caused by their failure to pay the policy: e.g for the amount you would have recovered for the roof leak, had the policy been in effect, and possibly for the increase in policy cost due to the lapse of a policy and the need to replace it at a higher cost. You'd have to sue the mortgage company if they won't voluntarily pay you, but seem to have a reasonable chance of winning if you show that the fault must have been theirs.

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