Blanket and Other Policies Covering Multiple Properties
The coverage provided by a blanket policy must be as good as, or better than, a single property insurance policy. The PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). must be listed and identified in the policy or associated schedules.
A blanket policy includes
- blanket policies,
- blanket programs,
- first loss limit policies,
- first loss policies,
- layered programs,
- master policies,
- master programs,
- property programs,
- pooled insurance,
- pooled programs,
- shared limit policies, and
- similar programs insuring multiple locations under the same insurance policy.
Blanket policies are acceptable as long as
- 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 the following:
- Are the required coverages adequate for the subject property or properties?
- 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 under the Note. obtain additional coverage?
Programs insuring properties that are not under common ownership with the BorrowerBorrowerPerson who is the obligor under the Note. or a Key PrincipalKey PrincipalPerson(s) who control and/or manage the Borrower or the Property, are critical to the successful operation and management of the Borrower and the Property, and who may be required to provide a Guaranty. , PrincipalPrincipalPerson who owns or controls specified interests in the Borrower per Part I: Mortgage Loan, Section 303. , 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 under 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:
- a significant savings in premium when a BorrowerBorrowerPerson who is the obligor under the Note. adds the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). to an existing policy; or
- 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 are expected to evaluate the insurance administrator, considering factors such as the acceptability of its business practices, possible payment of claim by the administrator, years in business, etc. This evaluation is in addition to the other analysis expected for blanket policies.
You must document your analysis of any blanket policy in your Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .