HomeMy WebLinkAboutVIII-15 Resolution Insurance Proceeds from Fire Damaged Buildings
City Council Memorandum
To: Mayor Fasbender and City Council
From: John Hinzman, Community Development Director
Date: June 21, 2021
Item: Resolution: Insurance Proceeds from Fire Damaged Buildings
Council Action Requested:
Adopt the attached resolution directing the establishment of a trust or escrow account for
insurance proceeds due to building damage through explosion or fire. Action will
provide additional impetus for the cleanup or remediation of damaged buildings.
Adoption requires a simple majority of Council.
Background Information:
Minnesota State Statutes 65A.50 allows cities to escrow up to 25 percent of insurance
proceeds due to a fire or explosion on real property. The proceeds are held by the City to
ensure timely clean up and to protect against public health and safety concerns resulting
from the damage. Funds would be released from escrow upon proof of repair,
replacement, or removal of the structure. Funds may also be released if the insured has
entered into a contract to perform repair, replacement or removal.
Adoption of the provision would include the following:
1. City Administrator notifies the Commissioner of Commerce that the city should
be added to the list and include a copy of the signed resolution.
2. When there is a fire damaged property, upon reaching a settlement, the insurance
company withholds 25% of the proceeds.
3. The insurance company notifies the city, as well as any mortgage company of the
withheld amount.
4. If the City fails to respond within 30 days, the money goes to the property owner.
5. If the City wants the 25%, it must respond with an affidavit from the fire chief (or
designee) stating that the property violates health and safety standards.
6. Insurance company will send the 25% to the City, and the City has to deposit it
into a trust account or escrow account. The money cannot be commingled with
regular city funds.
7. If the property owner is in default on their mortgage, the mortgage company can
request the 25% and the City must send it to them.
8. If the property owner fixes the damaged building or hires a contractor to fix it
within 45 days after the City receives the money, the City has to return the 25% to
the property owner.
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9. If the property owner does not fix the damaged building, then the City can use the
money to fix it or demolish it.
Financial Impact:
Adoption should provide for timelier repair of damaged buildings and protect the tax
base.
Advisory Commission Discussion:
N\A
Attachments:
Resolution
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HASTINGS CITY COUNCIL
DAKOTA COUNTY, MINNESOTA
RESOLUTION NO. - _______
A RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A TRUST OR
ESCROW ACCOUNT IN RELATION TO REAL PROPERTY DAMGAGED
THROUGH FIRE OR EXPLOSION IN ACCORDANCE WITH MINNESOTA
STATE STATUTES 65A.50
WHEREAS, Minnesota Statutes, Section 65A.50 provides for a city to receive a portion
of insurance proceeds for a loss to insured real property due to fire or explosion and a final
settlement is reached on the loss to the insured real property; and
WHEREAS, in order to comply with the law, the city must establish a trust or escrow
account to be used as prescribed by Minnesota Statutes, Section 65A.50 and intend to
uniformly apply the law to all property located within the City; and
WHEREAS, the City of Hastings finds that there have been certain real properties located
within the City that due to fire or explosion, violate the City’s health and safety standards;
and
WHEREAS, upon the failure of a property owner to remove or repair the damaged
structure, the use of insurance proceeds would have enabled the City to repair, replace or
remove the damaged structure.
NOW, THEREFORE, BE IT RESOLVED by the Hastings City Council that:
1. The Finance Director is hereby authorized to establish a trust or escrow account to
be used as prescribed by Minnesota Statutes, Section 65A.50.
2. The City intends to uniformly apply Minnesota Statutes, Section 65A.50 to all
property located within the City.
3. The City Administrator is authorized to notify the Commissioner of Commerce that
the City requests to be added to the list of municipalities which have elected to
apply Minnesota Statutes, Section 65A.50, which shall be distributed to all
insurance companies transacting property insurance in this state.
Adopted by the City Council of the City of Hastings this 21st day of June, 2021.
Ayes:
Nays:
Absent:
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Mary Fasbender, Mayor
ATTEST:
______________________________
Kelly Murtaugh, City Clerk
I HEREBY CERTIFY that the above is a true and correct copy of resolution presented to
and adopted by the City of Hastings, County of Dakota, Minnesota, on the 21st day of June
2021, as disclosed by the records of the City of Hastings on file and of record in the office.
______________________________
Kelly Murtaugh, City Clerk
(SEAL)
This instrument drafted by:
City of Hastings (JH)
101 4th St. East
Hastings, MN 55033
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