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SCOPE OF COVERAGE A. CLAIMS MADE COVERAGE Coverage under the MCPL policy applies only to Claims that are first made against the insured during the policy period. Coverage under the policy is not triggered when a Wrongful Act occurs, but rather when a “written demand for money damages” is made to an insured within the policy period. Future Claims. An insured might become aware, during the policy period, of a Wrongful Act or other circumstances that it believes may give rise to a future Claim against an insured, but an actual Claim has not yet been made. In that event, if the insured provides written notice to Underwriters, and identifies the Wrongful Act, potential claimants and damage that may result, then any future Claim arising from those circumstances shall be deemed to have been made at the time such written notice was given. (Condition VI.B.). Matters that Preceded the Policy Period. The MCPL policy excludes coverage for events and circumstances that were the subject of a Claim or notice under a prior policy. (Exclusion O.1). It also excludes coverage for any Loss that results from any events or circumstances, known to the insured prior to the policy’s “Coverage Date,” that would cause a reasonable person to believe that a Claim for a Wrongful Act may be made. (Exclusion O.3). The “Coverage Date” is set out in the Policy declarations. The date typically coincides with the inception date of the first policy issued to the insured by Underwriters. An insured is not excused from giving notice on the basis that it thought the Claim lacked merit. The insured must give notice of circumstances if a reasonable person would believe that a Claim may ensue Underwriters also request that applicants disclose in the policy application any circumstances that they are aware of prior to policy inception that could lead to a Claim. If an applicant is aware of circumstances and facts prior to policy inception that ultimately lead to a Claim during the relevant policy period—but fails to disclose those facts or circumstances in the policy application—the insurer may deny coverage or possibly rescind the policy. Courts often rely upon both the insurance application and policy language when ruling that the prior knowledge exclusion defeats coverage for the named insured based on knowledge of a single insured who failed to identify facts or circumstances in the policy application that could lead to a Claim. Interrelated Wrongful Acts. The MCPL policy provides that Claims arising out of “a single Wrongful Act or Interrelated Wrongful Acts shall be treated as single Claim…and such Claims shall be subject to the same Limit of Liability.” (Condition V.C.). The Policy defines “Interrelated Wrongful Acts” as Wrongful Acts that have “as a common nexus any fact, circumstance, situation, event or transaction or series of facts, circumstances, situations, events or transactions.” (Condition III.G.). To the extent two Claims arise from Interrelated Wrongful Acts, they are treated as a single Claim, and each single Claim is considered first made when the earliest of the Claims was first made. The Claims are subject to the same Limit of Liability and to a single Retention amount. (Condition V.C.). Whether two or more Claims arise from Interrelated Wrongful Acts depends on the facts alleged. For example, a letter from a claimant demanding payment and a subsequent suit brought by the same claimant to enforce the payment obligation would likely be deemed to arise from Interrelated Wrongful Acts. Also, multiple suits brought against the insured by different claimants based on a common scheme or pattern of alleged wrongful conduct by the insured may also be interrelated. Class action complaints may raise issues of interrelatedness, i.e., that Claims asserted by the respective class members are interrelated and thus subject to a single limit of liability. 9 · PROFESSIONAL LIABILITY COVERAGE
B. NOTICE OF CLAIMS The MCPL Policy requires the insured to provide notice of a Claim “as soon as practicable, but in no event later than sixty (60) days after the date such Claim is first made.” (Condition VI.A). Some professional liability policies provide “Claims made and reported” coverage. Under such policies, as a condition precedent to coverage, the Claim must be made against the insured, and notice of Claim must be given to the insurer, during the policy period. In contrast, the MCPL policy requires notice as soon as practicable not to exceed 60 days from the date of the date of the Claim. Also, the notice provision is not conspicuously identified as a “condition precedent” to coverage, either in the initial grant of coverage or at the beginning of the policy. Thus, although the notice provision states that compliance is a “condition precedent” to coverage, many courts will hold that the notice provision is not and, therefore, apply the notice prejudice rule to any violations of notice provision by the insured. Courts construe notice requirements as imposing a requirement of reasonable notice under the circumstances or substantial compliance. In a majority of states, an insurer is required to show that it was substantially prejudiced by an insured’s untimely notice before coverage can be denied on notice grounds. Prejudice will depend on the particular facts and circumstances, but is typically a high burden for the insurer to satisfy and late notice is thus not an absolute bar to coverage absent a showing of prejudice. C. RETROACTIVE DATE Coverage under the MCPL policy applies only to “Loss…as a result of any Claim…for a Wrongful Act that occurred on or after the Retroactive Date” specified on the policy’s declarations. The MCPL policy is often subject to graduated retroactive dates. Higher limits may be afforded for Claims that result from Wrongful Acts that occur on or after later retroactive dates. A retroactive date that is closer in time to the inception of the policy period can greatly reduce the scope of coverage. Claims under the MCPL often relate to problem loans, which may not become evident until the loan has been in existence for a period of time. D. RETENTION The MCPL policy applies to Loss in excess of the Retention amount stated in the policy Declarations. The Retention is the amount of the otherwise covered loss that is uninsured and must be borne by insured. The insured bears responsibility to pay the entire Retention amount before Underwriters have any duties to make payments. (Condition V.D). PROFESSIONAL LIABILITY COVERAGE · 10
Page 1 and 2: MORTGAGE COMPANY Professional Liabi
Page 3 and 4: MORTGAGE COMPANY PROFESSIONAL LIABI
Page 5 and 6: C. WHAT ARE DEFENSE COSTS? The MCPL
Page 7: E. WHAT CONSTITUTES A WRONGFUL ACT?
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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