Blanket and Other Policies Covering Multiple Properties

Guidance

A blanket policy may include

• blanket policies,
• blanket programs,
• first loss limit policies,
• first loss policies,
• layered programs,
• master policies,
• master programs,
• property programs,
• pooled insurance,
• scheduled limit policies,
• pooled programs,
• shared limit policies, and
• similar programs insuring multiple locations under the same insurance policy.

You may accept a blanket policy if

• all other requirements are met, and
• the Terms and Conditions endorsement does not reduce, limit, or exclude any required coverage.

When evaluating a blanket policy or multiple property policies, you should consider:

• Are the required coverages adequate for the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ?
• If the blanket policy limits are less than 100% of the total insurable value of the covered properties, is the shortfall warranted by high policy limits and geographic dispersion?
• If the blanket policy covers high catastrophic exposure in a geographically concentrated area, is the limit adequate for the exposure, or should the BorrowerBorrowerPerson who is the obligor per the Note. obtain additional coverage?

Programs insuring properties that are not under common ownership with the BorrowerBorrowerPerson who is the obligor per the Note. or a Key PrincipalKey PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , PrincipalPrincipalPerson who owns or controls specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. , SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). , or AffiliateAffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… of the BorrowerBorrowerPerson who is the obligor per the Note. , or managed by the same property management company, may provide evidence of insurance that appears to be a standard layered program. 

You should look for red flags signaling that a program may not be a standard layered program, such as:

• the BorrowerBorrowerPerson who is the obligor per the Note. or SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). is not the first named insured;
• the premium significantly decreased when the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). was added to an existing policy; or
• having a large, rounded coverage limit for property insurance.

You may confirm common ownership through an insurance broker or agent.  If the covered properties are not related by ownership or under the same property management, you should also evaluate the insurance administrator, considering

• the acceptability of its business practices,
• possible payment of claims, and
• years in business, etc.