This happens a lot more than people think. Chase tried to pull this on us just once--fortunately, my sis is my insurance agent and notified me immediately that my annual hadn't been paid. Now, when I receive a copy of my insurance premium notice every January, I set up a three-way phone call between Chase,, Farm Bureau, and myself. None of us hang up until the payment has been electronically sent and received. Takes about 20 minutes. Each year Chase tells me it's not necessary to do this, and each year I tell Chase that I don't trust them at all. Can't wait to have the damn mortgage paid off!
My attorney showed Wells Fargo that he could prove that I had been paying the insurance as part of my mortgage payment and that the insurance company could show that they had no record of Wells Fargo paying them.
Wells Fargo apparently figured it would be cheaper to cut a check than fight me in court while getting some bad PR and sent a claims adjuster out to cut me a check for $20 grand, 10 of it I used for repairs and the other 10 paid off the remainder of my mortgage.