Legal Question in Insurance Law in New York

New York State Insurance Law

I submitted a claim for Hail Damage to my car. The insurance company appraised the damage at $1500 and cut me a check but also made it out to the bank where I have my car loan from. The bank however will not sign off on the check unless I make it payable to the body shop. The body shop estimated the damage at close to $5,000. I decided I do not want to repair the car, but the bank will not sign off on the check. Can they do that? I thought that according to NYSIL ''does not require an insured to repair the automobile as a condition of payment of loss''.


Asked on 7/14/08, 8:42 am

2 Answers from Attorneys
Kevin Connolly Kevin J. Connolly

Re: New York State Insurance Law

The bank is entitled to the proceeds of the "involuntary conversion" of the car. Their collateral has $5000 of damage to it, and you're upset that they won't let you have $1500 of that for a spending spree?

You should, jointly with the lender, sue the pants off the insurance company. We can hope you did not sign a release of the claim to the insurace company, because in that case, the bank has the right to repo the car and call the loan.

If the car has $5000 of damage, why would anyone who is responsible accept $1500 for it?

That requirement refers to the insurance company's rights. It does not impair the lender's rights. To reiterate, if I were your loan officer, I would have taken the car back by now, repaired it, sold it and sued for the deficiency, because your failure to repair and your repudiation of the obligation to repair are both breaches of the loan agreement.

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Answered on 7/14/08, 8:47 am
Kevin Connolly Kevin J. Connolly

Re: New York State Insurance Law

The bank is entitled to the proceeds of the "involuntary conversion" of the car. Their collateral has $5000 of damage to it, and you're upset that they won't let you have $1500 of that for a spending spree?

You should, jointly with the lender, sue the pants off the insurance company. We can hope you did not sign a release of the claim to the insurace company, because in that case, the bank has the right to repo the car and call the loan.

If the car has $5000 of damage, why would anyone who is responsible accept $1500 for it?

That requirement refers to the insurance company's rights. It does not impair the lender's rights. To reiterate, if I were your loan officer, I would have taken the car back by now, repaired it, sold it and sued for the deficiency, because your failure to repair and your repudiation of the obligation to repair are both breaches of the loan agreement.

Read more
Answered on 7/14/08, 8:47 am


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