Updated September 28, 2026
Yes, but an open claim adds a moving piece to escrow that most sellers haven't dealt with before: unresolved money owed to the building, by a carrier, for damage that may or may not be fully repaired by the time you close. The claim doesn't have to be settled before you sell. It does have to be accounted for, and the structure you choose determines whether it's a smooth line item or a source of last-minute friction.
Given how much the LA insurance market has tightened, open claims are more common now than they were a few years ago — more claims filed, more disputes over scope, and more sellers reaching a decision to sell before the claim has actually been resolved.
Repair before you sell, using the claim proceeds. If there's time before your target closing date, completing the repair and closing out the claim removes the complication entirely. The buyer sees a resolved condition and a clean building, and you keep whatever margin exists between the claim payout and your actual repair cost. This is the cleanest option when your timeline allows it.
Assign the claim and proceeds to the buyer. More common when the repair is large or the claim is still contested. The purchase agreement specifies that unresolved claim proceeds transfer to the buyer at closing, along with the obligation to complete the repair. The price you negotiate should reflect the estimated repair cost against the expected proceeds — if the claim is likely to cover most of the repair, this is close to a wash; if the carrier has disputed part of the claim, the buyer is taking on more risk and will price that into their offer.
Seller retains the claim, credits the buyer for repair cost. You keep the right to collect on the claim yourself, even after the building sells, and instead give the buyer a credit at closing equal to the estimated repair cost. This works when you'd rather not deal with coordinating an assignment through the carrier, but it means continuing to manage the claim after you no longer own the property, which some sellers find more hassle than it's worth.
If there's a loan on the property, most mortgages give the lender an interest in insurance proceeds for damage to their collateral. Your lender will want to sign off on how the claim is handled before release, particularly if you're keeping any portion of the proceeds rather than applying them to repairs. On the buyer's side, their lender will want documentation of the claim status, the assignment terms if proceeds are transferring, and often a satisfactory repair timeline before they'll fund. Loop in both lenders early — this is not a conversation to start the week of closing.
Expect a buyer's diligence to include the claim number, the carrier's scope of repair, the settlement amount if one has been reached, and photos or an inspection of the damaged area's current condition. A buyer evaluating an assignment wants to understand not just the dollar amount but the likelihood the carrier pays the full claimed amount without further dispute — a claim in active dispute is worth less to a buyer than one that's been fully adjusted and simply awaits repair completion.
The insurance crisis coverage addresses the market-wide problem — rising premiums, non-renewals, carriers pulling back from older wood-frame buildings. An open claim is narrower: money currently owed for a specific loss, and the mechanics of resolving that through a sale. A seller can face both at once, and a buyer wants clarity on each separately — one is a one-time item to close out, the other an ongoing cost underwritten into every future year. A buyer's separate earthquake or PML evaluation is unrelated to an open property damage claim.
An open claim is exactly the kind of material fact that belongs in your seller's disclosure package from the start, not something a buyer discovers when their inspector notices unrepaired damage that doesn't match what was in the marketing photos. Sellers who disclose the claim, its status, and their proposed handling upfront get a smoother negotiation than sellers who let a buyer find it and wonder what else wasn't mentioned.
An open insurance claim is a logistics problem, not a reason to delay a sale. The sellers who handle it well pick one of the three structures early, loop in both lenders before closing week arrives, and disclose the claim's status plainly rather than hoping it goes unnoticed. The full sequence for pricing and marketing the rest of the sale is in how to sell an apartment building in Los Angeles.
Do I have to disclose an open insurance claim to buyers?
Yes — it's a material fact about the property's condition and financial status, and it belongs in your disclosure package rather than something a buyer finds independently.
Can the sale close before the claim is settled?
Yes, through an assignment of the claim and proceeds to the buyer, or by the seller retaining the claim and crediting the buyer for the repair cost — both are common structures.
Will an open claim lower my sale price?
Not necessarily, if it's handled through a clean assignment or credit that fairly reflects the repair cost against expected proceeds. It can affect price if the claim is disputed or the repair scope is uncertain.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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