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P. TILA EXCLUSION
The policy excludes coverage for loss
directly or indirectly arising out of or resulting from any actual or alleged (1) non-disclosure, concealment,
misrepresentation, misstatement or falsification of any terms of a loan, or of any rights or information required
to be disclosed or revealed under TILA; or (2) improper, excessive, illegal or unauthorized fees, penalties or
costs, including but not limited to prepayment penalties. The term “TILA” means, for the purposes of this
Exclusion, the Truth-in-Lending Act of 1968, Title I of the Consumer Credit Protection Act as amended (15
USC § 1601 et seq.) or Regulation Z (12 CFR Part 226).
Mortgage borrowers seeking to prevent foreclosure sometimes assert retaliatory Claims alleging predatory
lending practices. Such Claims, which were especially prevalent during the subprime mortgage crisis, typically
allege fraudulent misrepresentations of loan terms and violations of statutes, such as TILA. TILA claims are
advantageous for insureds because they did not require proof of intent to establish liability. The exclusion
effectively bars coverage for such Claims. Such Claims are no longer prevalent given substantial changes in
the real estate lending market since the sub-prime crisis. Also, portions of TILA which permit the recovery of
damages are subject to a one year statute of limitation. (Exclusion BB).
Q. REAL PROPERTY OWNERSHIP EXCLUSION
The policy excludes coverage for loss “directly or indirectly arising out of or resulting from any transaction (1)
involving real property in which any Insured or any affiliate of any Insured has or acquires a direct or indirect
ownership or financial interest, or (2) involving a lease or property in which any Insured or affiliate of any Insured
has a direct or indirect ownership or financial interest.” The coverage applies to negligent acts or omissions by
the insured, not to Claims involving the insured’s investment in or interest in real estate. (Exclusion EE).
R. BANKRUPTCY EXCLUSION
The policy excludes coverage for loss “directly or indirectly arising out of or resulting from the insolvency or
bankruptcy of any Insured or of any other entity including but not limited to the failure, inability, or unwillingness
to pay Claims, losses, or benefits due to insolvency, liquidation or bankruptcy of any such individual or entity.” The
bankruptcy exclusion in commonly invoked under D&O policies, since shareholder actions are often triggered by
bankruptcy. It is not commonly implicated under the MCPL policy. (Exclusion FF).
17 · PROFESSIONAL LIABILITY COVERAGE