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Unforeseen Risks


Lenders may have gaps in liability coverage for properties they control because they were abandoned rather than foreclosed.


“Considering this increase in exposure, it’s critical to review the lender’s GL program to ensure that they have premises liability coverage for mortgaged properties as well as foreclosed properties.”


Raymond Reed, Marsh


More and more borrowers are abandoning properties worth far less than what they owe on the mortgage. Once in control of the property, the lender could be held liable for bodily injury that may occur at the property. The problem is that the general liability policies offered by some carriers provide premises liability coverage only on foreclosed properties, not on mortgaged properties. The risk for lenders without this coverage is great, especially for commercial properties that may have undetected environmental liabilities.


Copyright © 2012 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.


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