The policy also pays for losses that the insured becomes legally obliged to pay as a result of claims made against the insured and reported to the insurer during the policy period. The losses covered under the policy include bodily injury, property damage, or cleanup costs resulting from onsite or offsite pollution conditions. In addition, the policy provides legal defense coverage for the lender whether the property is in possession of the lender or not. The lender liability policy can be written on a single-site or on a portfolio basis. The portfolio policy may be underwritten on a business segment, type of loan, a portfolio acquired from another lender, or a block of properties that encompass loans with the largest risk.
Lenders can choose any criteria they feel are appropriate.
The benefits of the lender liability policy include the following. The policy provides a competitive edge for lenders regarding standard environmental due-diligence techniques. A Phase I assessment does not provide protection when an environmental claim is made. The policy can replace or augment a lender's own due-diligence process. Properties with known environmental conditions can be included.