What it does
CP 00 70 protects a mortgage holder, not the property owner. It responds when the lender's own procedures for making sure borrowers carry property insurance break down. The form has four coverage agreements: Coverages A and B address property loss, and Coverages C and D address liability. Coverage C, as quoted in reported court decisions, pays sums the insured becomes legally obligated to pay as damages due to error or accidental omission in the operation of its customary procedure for processing and maintaining "valid insurance" for the mortgagor's benefit. The damages must arise out of its capacity as a mortgage holder, mortgage fiduciary or mortgage servicing agency.
Key points
- Coverage turns on the institution's customary procedures. The loss must come from an error or accidental omission in carrying them out.
- The vacancy condition applies to this form. Vacancy Changes (CP 04 60) rewrites its 60-day vacancy provision to use a scheduled occupancy percentage.
- Protective Safeguards (CP 04 11) lists this form among those whose exclusions it amends.
- Forms lists show 10 12 as the current edition in most states, with 06 07 in Florida and Hawaii. A 10 12 specimen appears in current reference specimen sets.
Who needs it
Any institution with a mortgage portfolio that relies on borrower-purchased hazard insurance. A typical claim arises when the lender fails to follow up on a lapsed borrower policy and the property is then damaged by a peril the policy would have covered.
Quoting and selling notes
- Underwriting focuses on portfolio size and the lender's written insurance-tracking procedures, including any outsourced tracking vendor.
- Coordinate with any lender-placed insurance program the institution uses.
