PIA National and the PIA of Georgia believe that lenders need to have evidence of property insurance in a timely manner. Of course, the best evidence of property insurance is to be able to see a copy of the policy. In certain instances the policy may not be available in a timely manner and therefore the lender needs to have proof of coverage. We fully understand the lenders' need for this information and are willing to work with them to resolve this issue in a manner that is satisfactory to all parties however PIA can not support the "Evidence of Insurance Commercial Property" form proposed by the Mortgage Bankers Association.
Even if we could support the form, it is ultimately up to the carriers to agree to use it because agents issue these forms on behalf of the carrier. The carriers have told us they can not use this proposed form because it would expose them to litigation and create confusion. For example, the proposed form asks if there is earth movement coverage. There are several different types of earth movement coverage including mudslides and sinkholes. If mudslide coverage is provided but sinkholes are excluded in the policy which box should be selected? The bottom line here is no form can substitute the policy. If the policy is not available, the lender must rely on another form such as an ACORD Certificate of Property Insurance. If the lender is not satisfied with this form, the lender may request a copy of the binder.
By attempting to introduce this new form into the marketplace, the Mortgage Bankers Association is essentially creating a new class of forms which would create confusion in the marketplace because everyone knows what certificates and evidence of insurance forms mean and what they do not mean. Policy rights can only be extended by policies and binders. If a document such as this proposed form purports to provide coverage not provided by the policy, then it is attempting to act as a policy form.
ACORD's Certificates Working Group, in which PIA has an active representative, identified consideration of potential revisions to the ACORD forms as a priority in 2008. Throughout 2008 and 2009, much time and effort was spent attempting to resolve differences of opinions concerning these forms, as well as related formatting enhancements. Active participants in the group represented lenders, producers, and insurers but despite extensive efforts, the participants were unable to come to consensus. The current forms reflect the result of required regulatory changes, and formatting changes developed by ACORD members in the working group, and voted on in the regular maintenance request process.
PIA National and the PIA of Georgia fully understand the need for lenders to obtain this information and are actively working with our carriers on a solution. A potential solution involves modernizing business practices to include a secure web portal where policyholder information could be available for insurers and other authorized parties such as certificate holders, mortgagees, loss payees etc.