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THE INSURING AGREEMENT The Insuring Agreement of the MCPL policy states as follows: The Company will pay on behalf of the Insured Loss in excess of the Retention stated in Item 4 of the Declarations which the Insured shall become legally obligated to pay as a result of any Claim first made against the Insured during the Policy Period for a Wrongful Act that occurred on or after the Retroactive Date stated in ITEM 6 of the Declarations. Under the Insuring Agreement, the MCPL policy provides a defense and indemnity to any “Insured” who sustains a “Loss” from a “Claim” made during the policy period for a “Wrongful Act” that occurred on or after the retroactive date as set forth on the declarations page of the policy. The terms “Insured,” “Loss,” “Claim” and “Wrongful Act” are defined in the MCPL policy, and those definitions must be considered when evaluating coverage. A discussion of these key definitions as they relate to coverage follows below. A. WHO IS AN INSURED? As defined in the MCPL policy: “Insured” means the individual, partnership, corporation or other entity named in Item 1 of the Declarations and shall include all persons who were, are or shall become: 1) directors, officers, partners or employees of the Insured while acting within the scope of their duties as such; and 2) the executors, heirs, legal representatives or assigns of each Insured otherwise insured herein in the event of his or her death, incompetency, insolvency or bankruptcy. Coverage under the MCPL policy applies to both the named insured and to its management and employees, but only while they are acting within the “course and scope” of their duties. To the extent Claims involve deceased, incompetent or insolvent insureds, those parties’ successors or legal assigns are also covered. The foregoing definition may be extended by endorsement to include other specifically named (or described) entities. For example, coverage may be extended by endorsement to “independent contractors” retained by an insured. B. WHAT CONSTITUTES A LOSS? As defined in the MCPL policy: “Loss” means money damages, settlements, and Defense Costs. Loss shall not include: 1. punitive or exemplary damages or the multiplied portion of a multiplied damages award; 2. criminal or civil fines or penalties imposed by law; 3. taxes; 4. matters that may be deemed uninsurable under the law pursuant to which this Policy shall be construed. Loss is commonly construed as an amount that insureds are either financially liable or legally obligated to pay. As defined in the policy, a “Loss” is limited to damages, settlements and Defense Costs (which is a separately defined term). It does not include: • Restitutionary awards, such as an order requiring the insured to repay excessive fees that were improperly charged; • Fines or penalties imposed by law, e.g., a fine levied by a governmental agency for regulatory violations; • Non-monetary remedies, such as Claims seeking injunctive relief; • Awards of punitive or criminal damages, or multiplied damage awards; • Tax losses; • Other matters deemed uninsurable. For example, in some jurisdictions, including California, Claims for punitive damages are uninsurable as a matter of law. 5 · PROFESSIONAL LIABILITY COVERAGE
C. WHAT ARE DEFENSE COSTS? The MCPL policy covers Loss as a result of a Claim, and Loss, as defined in the policy, includes Defense Costs. The policy provides the following definition of Defense Costs: “Defense Costs” means reasonable and necessary legal fees and expenses incurred with the approval of the Company in connection with the investigation, adjustment, settlement, defense or appeal of a Claim made against an Insured for a Wrongful Act, and shall include the cost of attachment or similar bonds. Payment of Defense Costs by the Company shall reduce, and may exhaust, the Limit of Liability under this Policy. “Defense Costs” shall not include salaries, wages, fees, overhead, overtime, or benefit expenses incurred by or associated with the Insureds. Legal Fees and Expenses. Defense Costs include legal fees and expenses that are incurred in connection with the investigation, adjustment, settlement, defense or appeal of a Claim. They do not include fees or costs incurred by the insured for other purposes, such as costs incurred in analyzing the potential for coverage under the policy or the availability of other insurance. Internal costs, such as salaries, fees, overhead or overtime, also do not constitute Defense Costs. Reasonable and Necessary. Defense Costs compensable under the policy are limited to those fees and expenses that are “reasonable and necessary.” The reasonableness of fees and expenses depends on the nature and venue of the Claim. Rates must be commensurate with the location in which the litigation is pending and the complexity or special knowledge required under the circumstances. The necessity of fees and costs likewise depends on the case, but generally Underwriters will pay for only one firm to defend the Claim and will not pay for travel expenses incurred if the firm is not located in the venue where the action is pending. Approval of the Company. Under the policy, Defense Costs may be incurred only with the approval of Underwriters. Underwriters will often give deference to an insured’s choice of counsel, subject to approval of the firm’s rates, qualifications and geographic proximity to the case. Costs incurred before an insured gives notice of Claim are not incurred with Underwriters’ approval and therefore cannot satisfy the applicable retention or be considered for coverage under the policy. Defense Within Limits. Defense Costs are part of, and not in addition to, the limit of liability under the policy. The payment of any Defense Costs reduces, and may entirely exhaust, the limits of liability and Retention amount in the MCPL policy. PROFESSIONAL LIABILITY COVERAGE · 6
Page 1 and 2: MORTGAGE COMPANY Professional Liabi
Page 3: MORTGAGE COMPANY PROFESSIONAL LIABI
Page 7 and 8: E. WHAT CONSTITUTES A WRONGFUL ACT?
Page 9 and 10: B. NOTICE OF CLAIMS The MCPL Policy
Page 11 and 12: the policyholder being defended and
Page 13 and 14: EXCLUSIONS A. IMPROPER BENEFIT EXCL
Page 15 and 16: K. GOVERNMENTAL ACTION EXCLUSION Th
Page 17: COMMON ENDORSEMENTS In addition to

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