MORTGAGE HOLDER NEGLIGENTLY HANDLED INSURANCE CLAIM PROCEEDS

Recently, the Dallas court of appeals heard Green Tree Servicing, Inc.’s appeal of a summary judgment granted to an insured for negligent handling of insurance proceeds. Green Tree Servicing, LLC v. Thompson, 2012 WL 765040 (Tex.App.—Dallas, March 12, 2012) (not designated for publication.) Thompson and Richardson bought a mobile home together from Thompson’s employer before getting married.  The couple placed the loan with Green Tree in Richardson’s name, but all of the payments were from the couple’s joint checking account.  When the couple divorced, Thompson was awarded the mobile home and continued to make all of the insurance payments and mortgage payments but the loan remained in Richardson’s name.  The mobile home was destroyed by a fire and the insurance company paid the claim to its insured, Thompson, and the mortgage holder, Green Tree.  Green Tree instructed Thompson to endorse the check to it.  Thompson alleged that Green Tree told her that it would pay off the mortgage balance and send her the remainder.  Green Tree paid off the mortgage and then it sent the remainder to Richardson, not Thompson.  Thompson sued Green Tree and Richardson for negligence, fraud, and conversion.  The trial court granted summary judgment to Thompson against Green Tree for negligence because Green Tree “breached its duty as a constructive trustee to Lana Thompson, a joint payee … by disbursing funds that rightfully belonged to the Plaintiff to ... Richardson.”  The court of appeals upheld the judgment in favor of Thompson against Green Tree.