united-kingdom insurance real-property
Who gets the pay-out from insurance after a house fire? The person who lives there, or the person who paid the premium?
<p>Two siblings inherit a house 50:50. One lives abroad and wants to sell-up and split the money, the other is jobless, doesn't want to sell, lives in the house and won't negotiate with other sibling.</p>
<p>The absentee owner is the sensible one and has fully ensured the house, after a house fire the house is un-inhabitable and the insurance company pay the policy holder (the one who doesn't live there!)</p>
<p>My questions are....</p>
<ul>
<li>does the sibling who lived in the house have any legal claim to the insurance payout? (he owns half the house but paid non of the premiums)</li>
<li>is there any legal requirement to use the insurance money to repair the house?</li>
</ul>

<p>The answer is, both of those depend on the specific provisions of the insurance policy.:</p>
<ol>
<li><p>The policy should name a beneficiary. this may be the person who took out the policy, or the owner(s) of the house. It could (unusualy) even be soem other person. How is the default beneficiary if none is specified deepnds on the law of the jurisdiction, and I don't know the answer for the UK.</p>
</li>
<li><p>Normally there is no obligation to use an insurance payment to rebuild a damaged property. In some cases the policy will impose such an obligation, but this is unusual. More commonly, such an obligation may be imposed by some other contract to which the beneficiary is party. But the most common case is that there is no obligation.</p>
</li>
</ol>
<p>Local laws probably require that the debris be removed if there is no rebuilding, however, and may require other measures to make the site safe, depending on the exact conditions.</p>

<p>Usually, in the case of a total or near total loss, a homeowner's policy is payable to the the creditors on voluntarily incurred mortgages (who are listed as additional insureds) in the full outstanding amount of the mortgage in the case of a total loss, if any, with the balance payable to the owner of the property (who is not infrequently someone different than the person who pays the homeowner's insurance premiums).</p>
<p>Note also that a &quot;total loss&quot; almost always produces a check for much less than the total fair market value of the property prior to the loss (sometimes a condo in a high rise might be different), because even without any structures on it, the land itself has significant value, and the total loss only includes a total loss of the building itself.</p>
<p>In the case of a partial loss, there is paragraph deep in the boilerplate of the mortgage language (if any) that governs how that is handled. Normally a small loss is paid to the owner with an obligation arising under the mortgage to repair, and a large loss will trigger an obligation to pay off all or a significant share of the mortgage (sometimes in a multi-building property covered by one policy, the mortgage is pro-rated among the buildings and only the one suffering the loss has to be repaid in full).</p>
<p>Any amount payable to a tenant would be a side transaction between the owner and the tenant payable pursuant to the terms of the lease, and not a transaction directly between the tenant and the homeowner's insurance company, even if the tenant is directly paying the premiums on the policy (as would be common in the case of a triple net lease).</p>
<blockquote>
<p>does the sibling who lived in the house have any legal claim to the
insurance payout? (he owns half the house but paid non of the
premiums)</p>
</blockquote>
<p>The homeowner's insurance policy will 99.9% of the time have all owners of the property as insureds. No law says that this is required, but I've never seen or heard of a policy written any other way.</p>
<p>The co-owner who paid the insurance may have a claim for contribution of one half of the insurance premiums paid by that co-owner against the co-owner who didn't pay the premiums, however.</p>
<p>Also, if the occupant co-owner caused the incident that led to the loss through the occupant co-owner's negligence, the absentee homeowner may a claim against the negligent co-owner for any loss caused by the fire that can be setoff against the occupant co-owner's share of the insurance proceeds. This issue is a complex one that could hinge on case law and statutes that I'm not familiar with in the U.K. and upon the language of the policy. But I raise it as an issue to be analyzed.</p>
<blockquote>
<p>is there any legal requirement to use the insurance money to repair
the house?</p>
</blockquote>
<p>Only when there is a mortgage or lease that requires that the owners do so. As noted above, this would be common if the claim is for a small partial loss (e.g. a few broken windows due to a hail storm), but there is no such obligation if the property is owned free and clear and there is no lease that creates the obligation.</p>
<p>More often a co-owner of real property who resides there would not have a lease and has a right to occupy the property rent free, but sometimes a lease is entered into anyway to clarify the obligations of the co-owners. The only real exceptions to this are that:</p>
<ul>
<li><p>if the damage to the house is partial but causes the house to be uninhabitable, it is conceivable that the applicable building code regulations might impose what is effectively a joint and several obligation of the owners to repair the house to a point where it is habitable for it to be marketable and legal to reside in, and may even require some repairs if the partial damage renders the property a public nuisance.</p>
</li>
<li><p>if the house is part of a homeowner's association of some type (condominium, etc.) whatever it may be called (there are several varieties), it is likely that the covenants of the association will require that repairs be done and authorize the association to repair the property sufficient to comply with the covenants at the expense of the co-owners (secured by an HOA lien against the house) if the owners don't take action for a reasonable time after being given notice.</p>
</li>
</ul>
