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What should I do if the insurance company refuses to pay the full claim?

IndianaLien ForeclosureLien ReleasesMechanics LienRecovery Options

I'm the owner of a restoration company. I placed a lien on a property and the insurance company responded that they're going to pay a portion of the claim. I do not want to release the claim but I'm also not sure what other options I have.

1 reply

Jul 25, 2019
I'm sorry to hear about that, though I'm glad at least partial payment is on the table. Ultimately, when once a lien has been filed, there are a number of different ways a lien claimant can proceed - and which method might be best ultimately comes down to a business decision by the claimant, themselves. We've considered some of the options before in these articles: (1) Mechanics Lien & Partial Payment: What Are the Options?; and (2) I Received Partial Payment — What Should I Do With My Mechanics Lien? Still, let's explore some of the options below.

Negotiating a better settlement
Still, there are some things to consider. For one, a lien claimant doesn't have to accept the first offer they receive. When an insurance company offers to pay less than what's owed, it's a negotiation. A claimant can absolutely counter that offer - or they can stand pat, refusing to accept less than what's actually owed. Both options have their merits, though we hate to see a contactor get paid less than what they're actually owed. For some claimants, accepting less makes sense if they're wary of proceeding with their lien claim and if they really just need the cash flow. But no contractor should feel like they have to settle, especially if the payment offer is significantly less than what's owed.

Partial release
One option outside of standing pat or taking a settlement offer may be to offer to partially release the lien, to the extent that payment is made. Indiana, like many other states, doesn't specifically provide for the ability to partially release a filed lien in its lien statute. However, in practice, many lien claimants partially release their mechanics liens once partial payment has been made. So, partially releasing the lien may be an option. Granted, an insurance company would probably be looking for a full waive and release of a lien claim if they're making payment, and if the claimant promises to fully release their claim in exchange for payment, it'd be a bad idea to renege on a deal already agreed to.

Notice of Intent to Foreclose
When it doesn't seem like an owner or their insurer is taking a filed lien claim seriously, yet another option may be to send a warning or threat that, if payment isn't made, the lien claimant will proceed with a lawsuit to enforce the claim. By sending a document like a Notice of Intent to Foreclose, a claimant can show that they're serious about getting paid and that they won't take nonpayment as an option. Considering the drastic nature of mechanics lien enforcement suits, an owner (or their insurer) will typically want to do what it takes to make sure they aren't fighting off foreclosure of the property. Plus, even if recipients of the notice aren't willing to make full payment, this could help to reach a better settlement.

Keeping a lien in place
This can kind of be lumped in with the section above, but a claimant doesn't necessarily need to take immediate action on their lien. In Indiana, the deadline to enforce a filed mechanics lien is generally 1 year from the date the lien was recorded (unless shortened by a Notice to Foreclose filing). So, a lien claimant doesn't really need to take action until the deadline to take action starts closing in. While it might not always be a good option to wait and see, keep in mind that there's often plenty of time to negotiate payment.

Enforcing the lien
Enforcing a mechanics lien requires legal action, and that can be expensive and time-consuming. However, when there are large sums on the line, it might be worthwhile to enforce a filed mechanics lien. As mentioned above, it all comes down to a business decision on the claimant's end. Levelset discusses this dilemma further in this article: Is Foreclosure With a Mechanics Lien Worth It?

I hope this information was helpful! Ultimately, when deciding how best to proceed, consulting a local construction attorney might be helpful. They'll be able to assess your potential options for moving forward, along with any relevant information or documentation, and advise how best to proceed. And, chances are, they've dealt with a similar situation before. Good luck!
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