What legal options do lenders have after a beneficiary change on a loan insurance policy?

Full question:

A loan for a significant amount of money was made interest free in 1995. The lenders were provided with an insurance policy to secure the loan at the expense of the person making the loan. Eight years later (2003) the beneficiary was changed without the lenders knowledge. The person(s) making the loan have a signed agreement with the deceased that there would be no changes without notice and approval. The insurance company settled the claim with the deceased wife who was named the new beneficiary. She was aware of the obligation of her husband; however, she refuses to honor her deceased husband's agreement. What legal recourse does the person(s) that made the loan have to get their money?

Answer:

Claims against a deceased person's estate are typically made during the probate process. If the person died with a will, the executor named in the will manages the estate. If there is no will, an administrator is appointed. The executor or administrator is responsible for paying the deceased's debts from the estate's assets.

In this case, the lenders can file a claim against the estate in probate court. Contracts are legally enforceable agreements, and a signed agreement exists stating that no changes could be made without notice and approval. If the insurance company paid the claim to the new beneficiary without honoring this agreement, the lenders may have grounds for a breach of contract claim.

A breach of contract occurs when one party fails to fulfill their obligations, causing the other party to suffer damages. The lenders could seek remedies such as money damages, which would compensate them for their financial losses. Other remedies include restitution, which aims to return the lenders to their original position before the contract was made.

It's crucial for the lenders to act quickly, as there are time limits for filing claims against a deceased's estate. Under Florida law, claims must be filed within three months of the first notice to creditors or within thirty days if the creditor was directly served (Fla. Stat. § 733.702). If the claim is not filed within this timeframe, it may be barred.

Given the complexity of this situation, consulting a local attorney for specific legal advice is highly recommended.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

FHA insurance is designed to protect lenders against losses when borrowers default on their loans. It allows borrowers to qualify for loans with lower down payments and credit scores. This insurance helps make homeownership more accessible, particularly for first-time buyers. If a borrower fails to repay the loan, the FHA insurance compensates the lender for the unpaid balance, reducing the lender's risk. This program is managed by the Federal Housing Administration (FHA). *Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.*

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