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What
is the Effect if the Construction is Financed by Insurance
Proceeds?
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Insurance
proceeds for the improvement of real property that are payable
to the owner of the property, or a lienor, by virtue of
damage or destruction of the property, by fire, or other
casualty, to the extent received by the owner or lienor,
are subject to the liens of lienors to the same extent that
the real property is subject to liens. The amount of any
premiums paid by the owner, or lienor, for the insurance
are properly deductible from the proceeds to which the liens
apply. The insurance proceeds are deemed to be trust funds
for a period of one year from the date of receipt, and the
named insured is the trustee of the funds in order to make
certain the funds are applied to the costs of the improvement.
Consequently, any failure of the named insured to use the
proceeds for the payment of the valid liens of lienors who
provided labor, services, or materials for the improvement
of the damaged property results in a cause of action against
the named insured by the unpaid lienors for damages for
breach of fiduciary duty.
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to Contractor Resources
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DISCLAIMER
AND CAUTION: THESE MATERIALS ARE PROVIDED FOR GENERAL INFORMATIONAL
PURPOSES ONLY AND ARE NOT INTENDED NOR SHOULD THEY BE CONSTRUED
AS LEGAL ADVICE AS TO ANY PARTICULAR SET OF FACTS OR CIRCUMSTANCES.
DUE TO THE COMPLEXITY OF THE CONSTRUCTION LIEN LAW STATUTES
AND THE CASES INTERPRETING AND APPLYING THE STATUTES, IT
IS RECOMMENDED THAT COMPETENT LEGAL COUNSEL BE CONSULTED
IN REGARD TO ANY QUESTIONS AS TO THE APPLICABILITY OF CONSTRUCTION
LIEN LAW TO ANY SET OF PARTICULAR FACTS.
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