A deed in lieu of foreclosure wiped out more than the mortgage
A commercial lender forgave a $7 million mortgage debt - then asked a court to hand it the insurance money anyway.
The Sixth Circuit said no.
In a published decision filed on November 2, 2026, the federal appeals court affirmed a ruling against Sinmier, LLC, a commercial real estate lender that sued the insurance broker, insurer, and underwriter connected to a resort property in Sandusky, Ohio. The court held that when Sinmier accepted a deed in lieu of foreclosure - essentially taking ownership of the property instead of going through the foreclosure process - and released its borrower's debt, it wiped out its own right as a mortgage holder to claim insurance proceeds. Every claim Sinmier had brought against the insurance defendants fell with it.
The $7 million loan and a rough winter
The facts start in 2018. Sinmier loaned $7 million to Vintro Hotels and Resorts to buy the Maui Sands Resort and Waterpark, a Lake Erie property in Sandusky, Ohio. Sinmier recorded an open-end mortgage on September 7, 2018.
Vintro was contractually required to insure the property. It used Bearing Insurance Group - then known as Bankers Insurance - as its broker. Two insurers entered the picture: Berkley and Everest Indemnity Insurance Company. Both issued policies effective August 23, 2018, and both cancelled when the closing fell through.
When the sale finally closed in October 2018, Everest issued a replacement policy. But the new policy listed Sinmier only as an "additional insured" under commercial general liability - not as a mortgagee. That distinction would matter.
Then winter hit. Frozen pipes burst and flooded the resort. Two rooftop HVAC units froze, then caught fire. Wind and cold piled on more damage. Vintro filed an insurance claim on January 26, 2019. Everest advanced $350,000 and eventually settled Vintro's claim for an additional $775,000 in June 2019.
The deal that closed every door
By March 2019, Vintro had defaulted on the loan. Sinmier sued for foreclosure, breach of contract, fraud, and intentional misrepresentation. The parties settled that October.
The terms were straightforward. Vintro handed over a deed in lieu of foreclosure. The settlement agreement said the conveyance "shall be considered payment in full of Vintro's monetary obligations under the Note or Mortgage." Vintro and its owner, Inderjit Grewal, were also required to pay Sinmier $627,375 within nine months, backed by a consent judgment - a court-enforceable payment obligation the parties agreed to in advance. In return, they would "receive a release of liability on the note."
Debt settled. Mortgage released. Sinmier owned Maui Sands outright.
But Sinmier still had not recovered its full investment. So it turned to the insurance side. It sued Bearing, Everest, and EverSports & Entertainment Insurance (formerly Specialty Insurance Group), arguing all three had failed to protect its mortgage interest when the policies were written. Against Bearing, Sinmier raised claims including breach of contract, negligence, misrepresentation, and fraud - each premised on its status as a mortgage holder entitled to benefits under the insurance contracts. Against Everest and EverSports, it pursued similar breach of contract claims.
The district court ruled for all three defendants without a trial. Sinmier appealed.
Forgive the debt, lose the interest
The Sixth Circuit's reasoning was direct. Under Ohio law, a mortgage holder's right to insurance proceeds exists to protect payment of the debt - and only the debt. When the debt shrinks, that right shrinks. When the debt ends, the right ends.
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.
The bottom line for lenders
For commercial lenders structuring workouts, the case puts a clean marker down: releasing the underlying debt wipes out the right to insurance proceeds as a mortgage holder, full stop. That is true even when insurance money is still being negotiated, even when the lender has not been made whole, and even when the policy language appears to preserve certain rights. The structure of the settlement determines what survives - and here, nothing did.
The decision is published and carries binding authority across the Sixth Circuit, covering Ohio, Michigan, Kentucky, and Tennessee. The court emphasized that its holding reflects the majority rule nationwide.
