Watch Out – Not All Hazard Insurance Is the Same

Written By: Jay L. Hack


We recently closed a purchase money commercial mortgage loan for a bank lender. The property was a vacant two-family “brownstone” in Brooklyn. The borrower plans to renovate using other money, so it is not a construction loan. The binder arrived, not surprisingly the afternoon before the closing, without a policy. Two of the policy endorsements had the word “Vacant” in the title. After reading the forms for the endorsements on the Internet, we determined that the policy ceased to be effective after the property was vacant for 60 days unless the carrier expressly permitted a longer vacancy. We were dealing with an agent, not just a broker, and the agent issued a statement that the “permission period” for the vacancy would be the entire term of the policy.

Today’s Takeaway? Don’t just accept a naked binder, or even worse an ACORD Certificate of Insurance that “conveys no rights on the certificate holder,” without further investigation. Make sure that the insurance carrier doesn’t give you coverage that sounds good on the declarations page at the front but takes the important coverage away with endorsements attached to the back.

Jay L. Hack is available at

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