Lender forgave $7M mortgage debt then chased the insurance. Court says no
The court traced the principle through an 1851 Ohio Supreme Court decision, intermediate Ohio appellate rulings, and cases from Alabama, Alaska, Connecticut, New Jersey, and Tennessee, alongside leading insurance law treatises. This is settled law, the court said – “a foundational principle of insurance law.”
Applied here, the math was simple. The settlement agreement “fully release[d]” Vintro’s remaining liability and treated the deed in lieu of foreclosure as “payment in full” under the mortgage. By voluntarily ending the mortgage debt, Sinmier ended its right to claim insurance proceeds as a mortgage holder. Every claim it brought depended on that right. No right, no claims.
Sinmier tried several workarounds. It argued the settlement and the deed created ambiguous, conflicting terms. The court found Sinmier had given up the right to make that argument – it had told the district court the settlement was “clear” and could not now reverse course on appeal.
It argued certain negligence claims predated the settlement and should survive on their own. The court said Sinmier had not raised those arguments in the lower court either, and noted that “implicit theories of relief do not count as preserved theories of relief.”
Sinmier also pointed to language in the Everest policy that preserved a mortgage holder’s right to loss payment “even if the mortgage holder has started foreclosure or similar action.” The court was unmoved. Sinmier had not started foreclosure. It had ended the dispute. A deed in lieu of foreclosure, the court observed, “amounts to an alternative to foreclosure.” When title passed and the debt was released, the mortgage interest vanished.
