1. Forms
2. CP
3. CP-00-70

What the form is

The CP 00 70 Mortgageholders Errors And Omissions Coverage Form is a specialized insurance policy within the Insurance Services Office (ISO) Commercial Property Program. Its primary purpose is to protect financial institutions (mortgageholders) from losses arising out of errors or accidental omissions in connection with the procurement or maintenance of insurance coverage on properties for which they hold a mortgage. This form is unique in that it typically includes its own causes of loss and conditions, meaning the standard Commercial Property Conditions (CP 00 90) and separate Causes of Loss forms are generally not attached. However, the Common Policy Conditions (IL 00 17) are still required.

Classes of business it applies to

This coverage is specifically designed for:

• Banks
• Credit unions
• Savings and loan associations
• Other financial or lending institutions
• Mortgage-servicing agencies

Real-world example: A bank holds a mortgage on a commercial building and requires the borrower to maintain property insurance. Due to an administrative error at the bank, the bank's system fails to flag that the borrower's insurance policy has lapsed. A fire then damages the building. If the borrower is unable to cover the repairs and defaults on the loan, the CP 00 70 form could cover the bank's financial loss resulting from the uninsured damage, up to the policy limits and subject to its terms, because of the bank's error in not ensuring continuous coverage.

Special considerations

• Established Procedures: Coverage is often contingent on the insured financial institution having specific, established written procedures for obtaining and maintaining insurance on mortgaged properties. The error or omission must be a deviation from these procedures.
• Covered Causes of Loss: The form outlines what perils are covered. The loss to the mortgaged property must be caused by a peril that would have been covered by the insurance the mortgageholder should have ensured was in place.
• Four Distinct Coverages: The CP 00 70 typically provides four main coverages:
  • Coverage A – Mortgageholders' Interest: Protects the mortgageholder's interest in the property if insurance is not in place due to an error or omission.
  • Coverage B – Property Owned or Held in Trust: Covers direct physical loss to property owned by the insured or held in trust where the loss is due to an error or omission in procuring or maintaining insurance.
  • Coverage C – Mortgageholders' Liability: Provides liability coverage for damages the insured is legally obligated to pay due to an error or omission in their capacity as a mortgage fiduciary or servicing agent related to insurance maintenance.
  • Coverage D – Real Estate Tax Liability: Covers the insured's liability for damages arising from an error or omission in paying real estate taxes for a mortgagor.
• Exclusions: The form contains specific exclusions. For instance, it typically does not cover errors or omissions related to title insurance, mortgage guarantee insurance, life insurance, or health and accident insurance.
• Self-Contained Nature: As mentioned, this form often includes its own conditions and covered causes of loss, making it different from other commercial property forms that rely on separate attachments for these elements.

Key information for agents and underwriters

• Risk Assessment: Underwriters should carefully evaluate the applicant's internal controls and procedures for tracking insurance on mortgaged properties. The quality and adherence to these procedures are critical to the risk profile.
• Named Insured: It's crucial to accurately list all entities that should be covered on the declarations, as coverage typically only applies to the named insured.
• Coverage Nuances: Each of the four coverage parts (A, B, C, D) has specific triggers and limitations that must be understood. For example, Coverage C (Mortgageholders' Liability) can be quite broad and requires careful review.
• Policy Structure: Agents should ensure clients understand that while this is a Commercial Property form, it operates differently regarding the attachment of standard conditions and causes of loss forms.
• Limit Adequacy: Agents and underwriters need to assess appropriate limits for each coverage part based on the institution's portfolio size, average loan values, and potential for errors.
• Claims Handling: Claims under this form require thorough investigation to confirm that an actual error or omission occurred within the scope of the policy terms and that the insured had established procedures in place.