Current Gripes and Conundrums with Banks and Certificates

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1 Current Gripes and Conundrums with Banks and Certificates Sponsored By:

2 Current gripes and conundrums with banks, binders, and certificates with Irene Morrill, CPCU, CIC, ARM, CRM, LIA, CRIS, CPIW Vice President of Technical Affairs Massachusetts Association of Insurance Agents This program is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. With special thanks to the Insurance Services Office, Inc. for advance information, continued support, and permission to use their forms and information.

3 Private information So banks are now once in a while asking to have us, on our Agency letterhead, document the payment history/and/or if a Condo Assoc, etc, has paid it s premiums, keeping in mind that this is all direct billed of course. Can you give me advice on this as to how we can avoid this silly task for banks? Or maybe it s not legal to send them that payment info? 2

4 Private information Well, this was a new one to me so I asked our EO department: you ask the EO carriers about providing banks info on: Client payment history Condo association is master policy premium paid if the master policy is being used to provide insurance proof to get the individual condo owner loan 3

5 Private information The EO department talked to our then CEO, Frank Mancini, Esq., and he said The agent should not provide anything. The contract of the policy is between the insured and the carrier so the agent should have the bank work with either of them for payment history information. 4

6 Asking for dec page Not sure if you can help. XXX Bank is requiring a declarations page (not a binder) before there is a closing on a property. Supposedly this is a new requirement of FHA Loans. Most companies do not have immediate print on policies and why would they want to write a policy ahead of closing, when the closing date could change or the closing cancelled. The agent and the carrier would frequently be cancelling and rewriting. We just lost an account because of this and they went to a direct writer. This does not seem to be consumer friendly. Have you heard of this? Any suggestions? Thank you! 5

7 Asking for dec page And. I have an insured who is getting a FHA loan and they are stating a binder is not sufficient for closing and a declarations page is required. According to the bank, the MA law does not apply for this government loan. HELP! 6

8 Asking for dec page And. I have a bank insisting on having a copy of the HO3 policy for a new purchase for the closing. They will not accept a binder. What s up with that? Never had an issue like this in 35 years! It s not even a full moon!! 7

9 Asking for dec page Per MA law the bank can only request replacement cost of buildings and they MUST take a binder for 30 days if they write more than 5 mortgages a year. They can google these laws. 8

10 Asking for dec page Per below MA MGL...I thought they HAD to accept a binder: CHAPTER 183. ALIENATION OF LAND. CONVEYANCE BY DEED. Section 65. Acceptance of written memorandum as evidence of insurance. Section 65. Any mortgagee doing business in the commonwealth who makes in excess of five mortgage loans per year shall accept a written memorandum of a preliminary contract of insurance pursuant to section ninety-eight of chapter one hundred and seventy-five as evidence of insurance from any duly licensed agent, broker or insurance company; provided, however, that a contract for insurance for a term of not less than one year is issued within thirty days of said memorandum, or in the event of the cancellation of said memorandum, the mortgagee shall be provided with prior written notification thereof. (Amended by 1986, 505.) 9

11 Asking for dec page I verified with Dan that the MA law DOES apply to federal loans any loans. And he suggested.should this be a problem to contact the banking commissioner The Commissioner of Banks should be notified. I would file a complaint with the Division of Banks, 1000 Washington St. Boston, MA. Banks have to accept insurance binders for the first 30 days before they can ask for a copy of the actual policy. (Mass. Gen'l Laws Chapter 175 Section 98. Dan 10

12 Asking for dec page I'm sending this to Dan Foley, Esq., VP Government Affairs. Dan, should reminding bank of this law be sufficient to force them to accept a binder and not demand a formal Dec page? Yes, the law that Irene cites requires that a bank or mortgage company accept a binder and Section 98 of Chapter 175 that is referred to in Section 65 of Chapter 183 requires that the bank or mortgage company accept a binder for the first 30 days before they can request a copy of the insurance policy or in this case, a Dec page. Dan 11

13 Reinstatement and lienholder I m working with our account services department on a project to better assist our insureds. One of the questions that were brought up was lienholder notification. Based on policy language lienholders are required to be notified if a policy is cancelled. Do you know if there is any policy language that states if the policy is reinstated the lienholder is notified? If so, do you know if all carriers in MA are providing this reinstatement notification in the form of a declarations page? I know that the carriers we write with do produce this, but I m not sure of direct writers specifically. And while I m at it do you know if this would be the same country wide? 12

14 Reinstatement and lienholder There is no policy language regarding reinstatement notice but it just makes sense that whoever received a cancel notice gets a reinstatement notice. I've not seen such language requirement in any ISO policy... in any state... in my travels. 13

15 Additional insured status request I have a mortgage company insisting on being listed as an additional insured on a clients homeowners policy. They ve stated that I am the first person to ever tell them that banks are not, and will not, be listed as an additional insured. Your thoughts on this would be much appreciated. 14

16 Additional insured status request And We are seeing from mortgage carries now that they are requesting to be listed as not only the mortgagee and loss payee but also as additional insureds and are looking for certificates indicating this. We feel that this could pose a problem. How are most other agencies handling this and what is your opinion on this? 15

17 Additional insured status request There must be an over zealous risk manager or some off the wall court case in some state but I never thought that the mortgagee had to worry about the liability issues involved in lending $$ for property just getting names on loss payment checks. Sending this to Dan Foley, Esq., VP Government Affairs. Dan stated: The mortgage company is not an additional insured and cannot be listed as such on a homeowners policy. Obviously, the mortgage company may be listed as a loss payee but not as an additional insured. I m not sure what else to tell this company. Dan 16

18 Additional insured status request Generally a company won t do it and that is the answer. In a typical mortgage the mortgagee is not legally responsible for BI/PD arising out of property just subject to financial loss if something happens TO the property. Unless the bank HAS been added as an additional insured then it CANNOT be listed on the cert or binder in the affirmative. 17

19 Additional insured status request Agent responded: Thanks Irene. I gave them a lesson on what an additional insured is, I haven t heard back, so I think I m all set. It is amazing how one checklist can apply to everything. They told me they receive binders and certs all the time listing them as AI, and that this has never been an issue before. Even threw the the old you could lose the account. That s when I told them they had no idea what they were asking for. Then I get the from the big bad manager, gave her the AI lesson, and everything seems good. 18

20 Additional insured status request Sometimes that is JUST what you have to do Explain reality PUSH BACK 19

21 Claim payment and bank holds funds I don t think there is anything I can do but I have an insured who was paid by the insurance company for water damage, the property has a bank and the bank took the money and put it into escrow, the insured is making repairs but the bank has not given them any money. Any suggestions? 20

22 Claim payment and bank holds funds Is the bank holding it for payment of claim...or for future loan payments... which wouldn't seem fair as how do I get contractor paid? I'm sending this to Dan Foley, Esq., VP Government Affairs. Dan, is there anything to be done? Claim was paid May 2015, bank holding it for repair but insured doing work themselves sent receipt of materials the bank said they would pay, but now they wont. 21

23 Dan said Claim payment and bank holds funds I m assuming that the check was made payable to both the bank and the insured and it was sent to the bank. Unless the bank had a reason to hold the check and deposit it into the escrow account, I believe that the bank should have endorsed the check and sent it to the insured. 22

24 Dan said Claim payment and bank holds funds There is a law that was passed several years ago(1998) that establishes a 10 day waiting period before insurance companies can pay out claims. The law allows the Dept. of Revenue to check for liens. But this doesn t appear to be the case hear. Tell the bank that you ll be reporting them to the banking commissioner to see if that gets the funds released. and if it doesn t. report them to the banking commissioner 23

25 Situation: Valuation and releasing the mortgage money Insured buys home, we run a cost estimator and come up with a replacement cost on the house of 250K. We write HO-3 with coverage A at 250k. Because we are at 100% RC, Insurance companies will allow us to add RC dwelling endorsement. We attach 50% RC dwelling endorsement and we have to submit the cost estimator to the insurance company. We are consistently being asked by the bank to provide them with our cost estimator. I do not want to provide. 24

26 Valuation and releasing the mortgage money I know by law they cannot require insured to insure for more than 100% replacement cost, but I do not want to give them our estimator. Any thoughts or legalese I can throw at them? 25

27 Valuation and releasing the mortgage money You cannot send them a copy of the estimation without insurance company consent because it is not yours nor is it the insureds. It is proprietary information for the benefit of the insurance company. If the company ALLOWS you to send it because you have ASKED then I would but I would send it with a statement that is a value derived per questions asked on XYZ company valuation software and answers provided by insured to those insurance company questions 26

28 Valuation and releasing the mortgage money Regarding valuation and insurance the bank can t require more than: 183:66 Required insurance: limitation Section 66. A bank, lending institution, mortgage company or any mortgagee doing business in the commonwealth, when making a mortgage loan, shall not require, as a condition of a mortgage or as a term of a mortgage deed, that the mortgagor purchase casualty insurance on property which is the subject of the mortgage in an amount in excess of the replacement cost of the buildings or appurtenances on the mortgaged premises. 27

29 Valuation and releasing the mortgage money And it is illegal to over-insure buildings in MA: CHAPTER 175. INSURANCE. GENERAL PROVISIONS. Section 95. Fire insurance; over-insurance; prohibition; term of policy. Section 95. No company, and no officer or agent thereof, and no insurance broker shall knowingly issue, negotiate, continue or renew or cause or permit to be issued, negotiated, continued or renewed any fire insurance policy upon property or interests within the commonwealth of an amount which, with any existing insurance thereon, exceeds the fair value of the property, nor for a longer term than seven years. 28

30 Valuation and releasing the mortgage money The bank didn t want to listen to reality and wrote to the insured: Good afternoon Mr. X, I am the assistant to XXXX and YYYY asked me to follow up with you on the insurance evidence. Your insurance agent will not provide us with the coverage that is required. See the notes below. We either need the correct coverage OR ZZZZZ is an agent that we work with and you may want to call him for an insurance quote. He may be able to offer a premium that is less expensive. Let me know. The insurance company refuses to provide a copy of the cost estimator. does not have 100% replacement which is why it is needed. He 29

31 Valuation and releasing the mortgage money Mr. ZZZZZZ may be able to assist you so we can clear the loan for closing and he may save you some money. His information is below: I contacted Dan Foley, Esq., VP Government Affairs to ask what to do 30

32 Valuation and releasing the mortgage money You should ask the carrier if you can provide the costimator. If not, then you should send a letter to the bank stating that you cannot meet its request regarding the cost estimator nor can you provide a statement such as 100% replacement cost. The cost estimator is proprietary information of the insurance company and can't be given out. If the bank insists on getting this information, you will file a written complaint with the Insurance Commissioner asking that the DOI take appropriate action by fining the bank per the certificate of insurance law for the bank's unreasonable request. Dan 31

33 More on costimators I enjoy each and every one of your Tech Talks, but today s edition struck home. We spend an inordinate amount of time responding to lenders requests for specialized provisions and wordings for their binders- it gets worse every day. The latest craze is a demand for our cost estimators to justify the dwelling limits. After releasing them to several loan officers and answering a barrage of s and phone calls with questions and criticisms of the estimators, I now balk at every such request and accede only when it s clear the loan won t close without providing one. Again carrier permission required 32

34 Asking for more than building value Can a bank ask for more coverage on a Homeowners or a Dwelling Fire Policy?? Cost estimator for a home in Dorchester MA replacement cost $150,000. House is 676 square feet total. Insurance company inspected and came up with theses figure. Insured now is going for mortgage $329,000. Mortgage co wants us to increase to 329,000. Insurance company says we can increase but what if there is a loss? 33

35 Asking for more than building value Or Do you have a copy of the MA law bulleting when Mortgage companies request properties to be insured for more than the re-build cost? I have an issue with a bank that does not want to pay the bill unless our insured increases the dwelling amount. I cannot find anything on the mass agent website. 34

36 Asking for more than building value Just a minute ago, a VP from a local bank insisted we change the dwelling limit to his $690,000 market value appraisal or he would pull the loan {the 100% RC is $350,00}. After 15 minutes of educating him on MA regulations and the distinction between market vs. insurable value, he relented, but what a waste of time. I m sure you all have this extra time to deal with banks. 35

37 Asking for more than building value The mortgage includes land and location see attached techtalk. The bank cannot ask for more than replacement cost of building. Technically over insuring : 183:66 Required insurance: limitation Section 66. A bank, lending institution, mortgage company or any mortgagee doing business in the commonwealth, when making a mortgage loan, shall not require, as a condition of a mortgage or as a term of a mortgage deed, that the mortgagor purchase casualty insurance on property which is the subject of the mortgage in an amount in excess of the replacement cost of the buildings or appurtenances on the mortgaged premises. 36

38 Asking for more than building value If it ONLY takes $150,000 to replace house then the $329,000 will NOT be paid out. If replacement value is $350,000 then the mortgage value of $690,000 is immaterial We are not a "valued" policy state. 37

39 Valuation and releasing the mortgage money And it is illegal to over-insure buildings in MA: CHAPTER 175. INSURANCE. GENERAL PROVISIONS. Section 95. Fire insurance; over-insurance; prohibition; term of policy. Section 95. No company, and no officer or agent thereof, and no insurance broker shall knowingly issue, negotiate, continue or renew or cause or permit to be issued, negotiated, continued or renewed any fire insurance policy upon property or interests within the commonwealth of an amount which, with any existing insurance thereon, exceeds the fair value of the property, nor for a longer term than seven years. 38

40 Out-of-state bank request So I ve have had a few calls lately from agents regarding the matter of making the insured take higher coverage then replacement cost and one agent was told by a mortgage company We are an out-of-state lender of Massachusetts and since we do not have any branches in Massachusetts, the laws do not apply to how we conduct business. So what would the agent s response should be to that? 39

41 Out-of-state bank request I myself have told many a customers before the closing (because I was tired of arguing on their behalf) if you have time to locate another lender that will not make such a request, then you need to tell them you are not taking the loan taking your business elsewhere. Why should you pay more for something you are not going get in return because they say so and do not want to look at the reality of realty. 40

42 Out-of-state bank request You think you ve heard everything. If the bank is loaning money on a property located in Massachusetts Of COURSE Massachusetts law apply 41

43 Debris removal request I received a demand from a mortgage underwriter for Debris Removal! That was a first!!! I simply sent a copy of MGL and they went away. At least until they came back for the replacement cost estimator which was also a NO. 42

44 Debris removal request Asking for more debris removal is really an intelligent request The problem with the HO policy is there is no debris removal endorsement. The only way to buy more is to over-insure the dwelling which we have already stated is.illegal Kind of catch 22 43

45 Cancellation with and without bank I don t understand why the HO policy was cancelled with just 7 days notice. I thought it was 20 days requirement and then they usually provide a few extra days for mailing time 44

46 Cancellation with and without bank The ISO HO policy cancellation language states 10 days notice for ANY reason if in effect less than 60 days and for other than non-payment which is always only 10 days. Other limited reasons would be 30 days The ISO MTG clause doesn t change this either 45

47 Cancellation with and without bank However, the HO amendatory endorsement changes the cancellation provision Cancellation for non-payment is still 10 days whenever cancelled For any other reason in the first 60 days the company only needs to give 5 days If the policy has been in effect over 60 days then only certain reasons can be used for cancellation but still ONLY 5 days 46

48 Cancellation with and without bank The HO ALSO changes the mortgagee clause in the HO policy and that is where the 20 days comes in So if no bank no 20 days and the more beneficial language of the HO policy in effect after 60 days doesn t apply 47

49 Cancellation with and without bank This restrictive language is allowed by MGL s This policy shall be cancelled at any time at the request of the insured, in which case this company shall, upon demand and surrender of this policy, refund the excess of paid premium above the customary short rates for the expired time. This policy may be cancelled at any time by this company by giving to the insured a five days written notice of cancellation, and to the mortgagee to whom this policy is payable twenty days written notice of cancellation except where the stated reason for cancellation is nonpayment of premium where, in such instance, this policy may be cancelled at any time by this company by giving to the insured a ten days written notice of cancellation, and the mortgagee a twenty days written notice of cancellation, with or without tender of the excess of paid premium above the pro rata premium for the expired time, which excess, if not tendered, shall be refunded on demand. Notice of cancellation shall state that said excess premium, if not tendered, will be refunded on demand and shall state or be accompanied by a statement of the specific reason or reasons for such cancellation. After this policy has been in effect for sixty days, or after sixty days from any anniversary date, no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following: (1) nonpayment of premium; (2) conviction of a crime arising out of acts increasing the hazard insured against; (3) discovery of fraud or material misrepresentation by the insured in obtaining the policy; (4) discovery of willful or reckless acts or omissions by the insured increasing the hazard insured against; (5) physical changes in the property insured which result in the property becoming uninsurable; or (6) a determination by the commissioner that continuation of the policy would violate or place the insurer in violation of the law. Where the stated reason is nonpayment of premium, the insured may continue the coverage and avoid the effect of the cancellation by payment at any time prior to the effective date of cancellation. 48

50 Cancellation with and without bank Big Bank is Requesting that we state in writing that they will be notified within 10 days by the insurance company in the event of a cancellation. Obviously we are not issuing any such statement, but my question to you is Does the insurance company by any law even have to notify the lender, or do they just have to notify the first named insured with the terms stated in the HO03 policy? 49

51 Cancellation with and without bank We just reviewed the state amendatory endorsement based on the MA law which states if there is a mortgagee it gets 20 days notice This policy may be cancelled at any time by this company by giving to the insured a five days written notice of cancellation, and to the mortgagee to whom this policy is payable twenty days written notice of cancellation except where the stated reason for cancellation is nonpayment of premium where, in such instance, this policy may be cancelled at any time by this company by giving to the insured a ten days written notice of cancellation, and the mortgagee a twenty days written notice of cancellation, with or without tender of the excess of paid premium above the pro rata premium for the expired time, which excess, if not tendered, shall be refunded on demand. 50

52 Cancellation with and without bank And PS in personal lines we don t have this first named insured issue And even in commercial lines a mortgagee gets a cancellation notice (at least as written by ISO) A lienholder or loss payee might not but mortgagee does 51

53 Why can t I say. The bank is asking that the binder state that coverage is 100% of the building replacement value or the building is insured on a guaranteed replacement cost basis I remember reading something you wrote stating The bank/mortgage company should NOT require any information on the binder other than the name, address, limit of insurance and form type. The bank/mortgage company should NOT be requiring ANY statement regarding guaranteed replacement cost or 100% replacement cost or anything that alludes to MORE than the building replacement cost. Could you please advise where in MGL this is stated. 52

54 And Why can t I say. Can you please send me a copy of the current law and any recent publications by MAIA showing that we are NOT required to provide a lender with Guaranteed Replacement Coverage wording? We are dealing with a mortgage company as we speak that is pressuring our staff for this. I could use this ASAP, there are so many publications I could not put my finger on them quickly on Mass Agent.com. 53

55 Why can t I say. We ve seen the laws stating 183:66 Required insurance: limitation Section 66. A bank, lending institution, mortgage company or any mortgagee doing business in the commonwealth, when making a mortgage loan, shall not require, as a condition of a mortgage or as a term of a mortgage deed, that the mortgagor purchase casualty insurance on property which is the subject of the mortgage in an amount in excess of the replacement cost of the buildings or appurtenances on the mortgaged premises. But the MA DOI wrote a bulletin a few years ago that still applies to binders. Unfortunately, the certificate law does NOT apply to binders 54

56 Why can t I say. The certificate law states: The certificate law states you CAN T state something on certificate that is not in the policy (MAIA has filed a bill that is aimed at binders too, hopefully it will pass. 55

57 Why can t I say. The 2011 MA DOI bulletin still applies as a reminder The bulletin applies to Certificates Evidences of coverage Binders 56

58 Why can t I say. MA is a file APPROVE and use state so putting something on a BINDER that is NOT in the policy could be construed as violating MA laws MGL 175 2B and 192 Also one may be misrepresenting coverage and in violation of MGL and MGL 176D

59 Why can t I say. And unfair claims practices law Again have NO right without filing and approval 58

60 Why can t I say. If your company HAS a guaranteed replacement cost endorsement you COULD say that but MOST carriers got rid of it and use either the HO Specified Add l Limit Coverage A or the HO Add l Limits of Liability (which is ISO s answer to the guaranteed replacement cost endorsement but those words AIN T in the endorsement) 59

61 Why can t I say. Just because you are ASKED does NOT mean it has to be done. Just saying.. 60

62 Just stop it I am having trouble with Bank X and some unusual demands and wanted to get your read on it. First they demanded that, prior to the closing,we add them as the mortgagee, This seemed inappropriate but since they had purchased Y bank and that s who they re-financing I changed the policy and we sent them a copy of the amended dec. Now they are calling to tell us that they need wind listed as a line item coverage and threaten to deny the client a loan if we do not comply. 61

63 Just stop it I reviewed the HO3 with this person and explained that wind is covered and would be only excluded by deductible but she was unmoved. I m not sure how else to handle it with this bank. 62

64 Just stop it There is no law regulating language on a binder HOWEVER The MA DOI wrote a bulletin see attached regarding certs (before the new 2015 cert law), binders, evidences that it should not be said on a binder if it is not in the policy HO-3 does not exclude wind for Coverage A and B but it doesn t say it either. Bill Wilson, CPCU, ARM etc from IIABA says if it isn t against the law then the agent has to make a business decision Your EO carriers prefer you not say anything if you show separate wind deductible then they should assume that wind is covered subject to its own deductible? 63

65 Say WHAT??? I am having a problem with X Bank in Florence SC. They have written a wind insurance policy for our insured and the premium amount is $ We have faxed them a copy of our insureds HO3 policy and because it does not specifically state wind & hail coverage on the declaration page they will not accept it. They stated to me wind is required simply because he lives in MA, they do not use a coastal guideline to determine this requirement. 64

66 Say WHAT??? I have spoken to a couple of people in the X BANK Insurance Dept and tried to explain to them that wind and hail is a covered peril on his policy and he is not required to have additional wind coverage and lives nowhere near the coast and have gotten nowhere. I cannot produce a declaration page with the wording they want when it does not exist. Do you have any suggestions? 65

67 Well, this was a new one for ME. Say WHAT??? I m not sure what to do other than threaten the Attorney General s Office but I m sending this to Dan Foley, Esq., VP Government Affairs. I agree unless there is a DIRECT EXCLUSION which could only happen in a surplus lines policy but it would STILL require an endorsement coverage is there 66

68 Say WHAT??? I realize in Florida there are areas where wind can be excluded but I have taught homeowners insurance in Florida and even there it requires an exclusion before the wind pool will allow purchase of coverage. Dan what should she do X Bank is OBVIOUSLY screwed up 67

69 Dan said: Say WHAT??? I would contact the Division of Banks to explain this situation. Gregory Short is the Deputy General Counsel there and his number is and his is: gregory.short@state.ma.us You may also want to contact the Division of Insurance and speak with the General Counsel, Robert Whitney whose number is and his is: robert.a.whitney@state.ma.us I agree with Irene and you. Hopefully, either the DOB or the DOI can contact Wells Fargo and talk some sense into whoever is handling the insurance. 68

70 How long does binder last? Acord 75 Insurance Binder... those of us who have been trained way back in the day know that binders were temporary insurance (30 days). We're having a discussion here in the office on whether or not we can issue an Insurance Binder for a full year? There are apartment managements that are now asking for an insurance binder for a full year if we cannot produce a policy showing such. Myself have always done an Evidence of Property Insurance. Question is how long is a MA Insurance Binder good for? Can it be issued for a year? 69

71 How long does binder last? There is no MA law as to how LONG a binder can last just that one must be acceptable to a mortgagee CHAPTER 183. ALIENATION OF LAND. CONVEYANCE BY DEED. Section 65. Acceptance of written memorandum as evidence of insurance. Section 65. Any mortgagee doing business in the commonwealth who makes in excess of five mortgage loans per year shall accept a written memorandum of a preliminary contract of insurance pursuant to section ninety-eight of chapter one hundred and seventy-five as evidence of insurance from any duly licensed agent, broker or insurance company; provided, however, that a contract for insurance for a term of not less than one year is issued within thirty days of said memorandum, or in the event of the cancellation of said memorandum, the mortgagee shall be provided with prior written notification thereof. (Amended by 1986, 505.) 70

72 How long does binder last? If an apartment manager wants proof for a YEAR Ask the company a binder can last as LONG as the company will allow Or as long as you know the risk is ACCEPTABLE to the company you can remind the property manager that a policy will replace the binder and it will be for one year 71

73 How long does binder last? I ve had companies allow me to state a year It is up to the company And besides a binder like a policy can be cancelled 72

74 How long does binder last? We all know that a binder is TWO pages long and BOTH pages MUST be sent 73

75 How long does binder last? You mentioned evidence form Which is the CORRECT form for when someone has a policy already That has inception and expiration dates and policy number A binder there is no policy yet But if there is a policy a copy of the Dec page is the same thing 74

76 How long does binder last? Do you have anything I can send to a bank requiring a 12 month binder not a 30 day on an HO3 to close a loan? 75

77 How long does binder last? A bank CANNOT requires a 12 month binder. A property manager is not subject to the law below CHAPTER 183. ALIENATION OF LAND. CONVEYANCE BY DEED. Section 65. Acceptance of written memorandum as evidence of insurance. Section 65. Any mortgagee doing business in the commonwealth who makes in excess of five mortgage loans per year shall accept a written memorandum of a preliminary contract of insurance pursuant to section ninety-eight of chapter one hundred and seventy-five as evidence of insurance from any duly licensed agent, broker or insurance company; provided, however, that a contract for insurance for a term of not less than one year is issued within thirty days of said memorandum, or in the event of the cancellation of said memorandum, the mortgagee shall be provided with prior written notification thereof. (Amended by 1986, 505.) 76

78 Again, it is entirely up to the insurance company How long does binder last? They MIGHT say yes to 1 year binder but I d rather tell bank too bad there IS a law 77

79 We are working on a new purchase ho3 with MPIUA. MPIUA and binders The binder request from the bank indicated that if the building coverage was lower than the loan amount we were to include 100% replacement cost via endorsement. Loan is for $104K Building coverage is at $219K and includes 25% add'l coverage through endorsement. So we did not add the 100% r/c endorsement. 78

80 MPIUA and binders As you know, changes to policies once a binder is issued by MPIUA can be a wonderful experience to get if needed in a hurry. <end sarcasm> :) The Bank came back and said that is not sufficient and they require 100% replacement cost on all policies. Are they able to require 100% r/c if the building coverage exceeds the loan amount..? in this case by more than double... 79

81 MPIUA and binders As you know, changes to policies once a binder is issued by MPIUA can be a wonderful experience to get if needed in a hurry. <end sarcasm> :) The Bank came back and said that is not sufficient and they require 100% replacement cost on all policies. Are they able to require 100% r/c if the building coverage exceeds the loan amount..? in this case by more than double... Insured was not too happy with the add'l premium required to add the 100% r/c endorsement. 80

82 MPIUA and binders You can t issue a binder on MPIUA as no one is an agent for MPIUA you can create immediate coverage with MPIUA and that is what is sent to bank. The bank can require FULL replacement cost of the building. See older techtalk that shows the laws that the bank must conform to. 81

83 MPIUA and binders Yes it is immaterial what the outstanding loan balance is high or low the MA law discusses replacement value of building not outstanding loan. Bank has right to protect investment. One should never type 100% replacement cost on a binder unless HO Add l limits of liability endorsement is on policy since no one ever really knows. And this endorsement does NOT say 100% replacement cost.anyway 82

84 Thank you for attending 83