Mortgageholder's Errors and Omissions Coverage Form, CP 00 70 10 12, covers a bank or other mortgage servicing institution against both direct damage and legal liability losses that may arise out of error or accidental omission in its customary mortgage-handling procedures. It offers four coverage agreements: A and B deal with property coverage; C and D with liability coverage. The applicable causes of loss are set out in the form itself under the provisions for each individual coverage so that no separate causes of loss form needs to be attached. The ISO Commercial Lines Manual (CLM) specifies that the Commercial Property Conditions form, CP 00 90 07 88 is not to be used with form CP 00 70. Instead, the form itself includes a modified version of those conditions that apply in addition to the Common Policy Conditions form, IL 00 17 11 98.

Topics covered:

Coverage A—mortgageholder's interest

Coverage B—property owned or held in trust

Coverage C—mortgageholder's liability

Coverage D—real estate tax liability

Exclusions

Limits of insurance

Additional coverage—collapse

Additional Conditions

Definitions

Coverage A—Mortgageholder's Interest

 A. Coverage

1.Coverage A – Mortgageholder's Interest

We will pay for loss to your "mortgageholder's interest" in Covered Property due to error or accidental omission, by you or your representative, in the operation of your customary procedure in requiring, procuring and maintaining "valid insurance" payable to you as mortgageholder against the Covered Causes of Loss.

a.Covered Property

Covered Property means:

(1)Real property; and

(2)Personal property secured in connection with that real property.

It includes such property:

(a)During and after your foreclosure; and

(b)Sold under an agreement in which you retain title, such as a conditional sales agreement.

b.Property Not Covered

Covered Property does not include:

(1)Accounts, bills, currency, deeds, food stamps or other evidences of debt, money, notes or securities. Lottery tickets held for sale are not securities;

(2)Land (including land on which the property is located), water, growing crops or lawns (other than lawns which are part of a vegetated roof); or

(3)Electronic data, meaning information, facts or computer programs stored as or on, created or used on, or transmitted to or from computer software (including systems and applications software) on hard or floppy disks, CD-ROMS, tapes, drives, cells, data processing devices or any other repositories of computer software which are used with electronically controlled equipment. The term computer programs, referred to in the foregoing description of electronic data, means a set of related electronic instructions which direct the operations and functions of a computer or device connected to it, which enable the computer or device to receive, process, store, retrieve or send data. This paragraph, (3), does not apply to electronic data which is integrated in and operates or controls the building's elevator, lighting, heating, ventilation, air conditioning or security system.

c.Covered Causes of Loss

The Covered Causes of Loss are those causes of loss against which you customarily require mortgagors to provide insurance policies that protect your "mortgageholder's interest." They do not include:

(1)Causes of Loss excluded under Section B., Exclusions; or

(2)Losses insured under mortgage guarantee insurance policies or programs, or title, life, health or accident insurance policies.

d.Coverage Extension – Mortgages Serviced For Others

We will cover loss arising from mortgages owned by others and serviced by you as if you owned the "mortgageholder's interest" in them. All such mortgages must be serviced under a written contract. We will make loss payment payable jointly to you and the mortgage owner.

 Analysis

 Coverage A insures a "mortgageholder's interest," defined in the form as the interest of the named insured mortgageholder in the real or personal property (including any interest resulting from a fiduciary capacity). It protects the insured against loss arising from errors and accidental omissions by the insured or a representative in requiring, procuring, and maintaining valid insurance to protect its interest. A mortgageholder protects its interest in property that is the subject of a mortgage by either requiring that the borrower obtain insurance (in which case the mortgageholder is added as an additional insured under the policy) or by buying its own insurance. Coverage A pays the loss if the insurance that should have been procured is lacking because of a covered error or omission.

 Covered property includes real property and personal property secured in connection with that real property. Coverage A applies during and after the named insured's foreclosure and to property sold under an agreement whereby the named insured retains title (such as a conditional sales agreement). In the event of foreclosure, the insured may be able to recover under both coverages A and B, as discussed later under Coverage B.

 Covered property does not include accounts, bills, currency, deeds, evidences of debt, money, notes, or securities. The form specifies that food stamps are treated as evidences of debt, but lottery tickets held for sale are not treated as securities and are therefore covered. The form also states that land (including the land where the property is located), water, growing crops, or lawns are not covered property. The 2012 edition of the form added an exception for lawns that are part of a vegetated roof.

 The 2002 form added electronic data to the list of property not covered. The section describes the meaning of electronic data and explains what computer programs are in relation to the description of electronic data. The 2012 edition made an exception for electronic data that is integrated in and operates or controls the building's elevator, lighting, heating, ventilation, air conditioning, or security system

 Covered causes of loss under coverage A are those that the named insured customarily requires mortgagors to cover by way of insurance. This may range from named perils to unspecified risk of physical loss (open perils). It may also include flood protection or earthquake coverage. Whatever is customarily required by the mortgageholder is the rule of thumb. The form specifies that the causes of loss do not include losses insured under mortgage loan guarantee insurance—insurance that protects the mortgageholder in the event that the mortgagor defaults—or under title, life, health, or accident insurance policies.

 Coverage A extends to cover a loss arising from mortgages owned by others and serviced by the named insured, as if the named insured owned the mortgageholder's interest. This servicing by the named insured must be done through a written contract. Any loss payment is made payable jointly to the named insured and the mortgage owner.

 Certain exclusions apply to all coverages, including coverage A, as discussed in the Exclusions section. Collapse coverage is provided on a limited basis, as discussed in the Additional Coverage—Collapse section.

 Coverage B—Property Owned or Held in Trust

 2.Coverage B – Property Owned or Held In Trust