If a UCC is Filed on “Accounts & Payment Intangibles” are Insurance Proceeds Included?
A perfected security interest in “accounts and payment intangibles” may include insurance proceeds… or, it may not. A bankruptcy court in Maine recently determined that a creditor’s perfected security interest did not extend to the insurance proceeds the debtor received from a multi-million dollar insurance policy.
The debtor operated a train, which tragically derailed, and the debtor was awarded over $3 million to settle all insurance claims. When the bankruptcy trustee submitted the claim for court approval, the creditor objected, citing their (the creditor’s) existing security interest.
From the author of “Proceeds from Insurance Settlement outside the Scope of Article 9”:
“The bankruptcy court found that the creditor did not have a valid security interest in the settlement proceeds… The court noted that Section 9-1109 of Maine’s Uniform Commercial Code states that Article 9 does not apply to a “transfer of an interest in or an assignment of a claim under a policy of insurance.” The court found that the settlement arose from the insurance policy, so it was outside the scope of Article 9…”
The idea of “proceeds” – like the insurance settlement in this case – is a bit murky. Make sure you seek legal guidance when reviewing your collateral description and filing a UCC. Don’t mindlessly record a UCC and assume that you are covered – it’s more than just a piece of paper.
When you need to secure mechanic’s lien or bond claim rights, serving a preliminary notice upon the required parties is just as important as ensuring the proper notice is served in the correct manner.
There are some states where the general contractor is the only party required to receive a copy of the preliminary notice. There are other states where the owner and general contractor are both required to be served with a copy of the notice.
How about those states which require the lender to be served with a copy of the preliminary notice? In this week’s post “When is the Lender Required to Receive a Copy of the Preliminary Notice?” we address the 3 states where statute dictates the lender is a required party, plus 1 state where it’s not required, but if served, your lien could have priority.
Learn more about Consignment Filings in this week’s infographic “Understanding the Consignment Filing”
We explain what a consignment filing is, how it works and what the difference is between “Sale or Return” and “True Consignment”
- 11/05/15 @ 1:00 PM – “Transforming to the Electronic Credit Department: The 10 Essential Technology Elements” presented by guest speaker, Phyllis Miller Saavedra, Director of Analytics Services at Emagia Corporation.
- 11/12/15 @ 1:00 PM – “Keeping Your Money: A Creditor’s Guide to Defending Preference Actions” presented by guest speaker, Sally E. Edison of Spilman Thomas & Battle PLLC.