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After reading your fact pattern............it appears that the facts state.......a buyer entered into a transaction where he/she agreed to handle fire insurance outside of escrow. The homeowners insurance was also not paid due to failure of buyer to submit an invoice.....However, focusing on the fire insurance (the substance of the question)..........when the house was partially destroyed due to fire.....the risk of loss had already shifted to the buyer and the buyer by the terms of his/her own contract had agreed to take responsibility for the fire insurance.
It does not appear that the escrow company ever agreed to be liable for the fire insurance in this situation.
The terms of the contract would control a situation where one party failed to act in accordance with the agreement and may provide a remedy. Here it appears that the parties acted in accordance with their agreement.
but, escrow provided buyer an estimated closing statement showing an amount to pay for insurance, but took this fee out at close since escrow did not have an invoice to pay, but buyer did provide an insurance company contact info prior to close, therefore, buyer is stating that escrow should have ordered it
i asked the buyer if he had at anytime contacted his insurance agent about this new investment property is purchasing and he said he has not informed the agent anything.
I see.......it appeared from the facts that the above was for the homeowners insurance and there was a separate fire policy which was to be handled outside of escrow.........is this not accurate?
homeowners and fire insurance are all in one
in addition, it is unclear to me..........has a closing taken place in this fact pattern?
it closed last month and the house got on fire last night
I see..................to answer.......Once the closing took place the risk of loss shifted from the seller to the buyer and it was the buyers responsibility to ensure it was in place. Here it seems that the buyer never followed up with the escrow company to see if they had sent the money to pay for the policy (and there was conflicting information) on the one hand they listed the expense in the estimated closing statement........on the other hand they stated that fire insurance was the buyers responsibility.
Overall, the risk of loss remains with the buyer.
i see, but can escrow be liable for this loss?
However, if the buyer can show that he/she acted with due diligence and the lack of purchase of the policy was through no fault of his/her own, but due to the mistake/negligence of the escrow company or if the escrow company was required by contract or otherwise to do so....................the buyer may be able to recover against the escrow company.
This is a factually intensive issue, but it appears the buyer did not necessarily act with due diligence, and may not be able to recover/shift any of this loss on the escrow company............he/she never even contacted the agent to see if a policy was in place or when payment was due.
As mentioned above, it is the buyers responsibility to ensure the insurance is in place once that risk of loss shifts to him/her and he/she should have followed up with due diligence when conflicting information was provided and should have known after receiving a refund of the money at closing that the insurance may not be in place.
It would not appear that this risk of loss shifts to the escrow company in this situation.
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