The ALTA® Board of Governors, at its meeting on October 11, 2006, provisionally approved three new CPL forms pending comment. The comment period concluded on December 10, 2006, with no adopted changes. These forms are now final and replace their predecessor forms.
ALTA® has modified the Closing Protection Letter (CPL) forms in several respects. It has limited the number of available forms to three: the "ALTA® CLOSING PROTECTION LETTER", the "CLOSING PROTECTION LETTER-LIMITATIONS," and the "CLOSING PROTECTION LETTER-SINGLE TRANSACTION LIMITED LIABILITY." The substantive changes are the same in all three of these revised forms.
The "CLOSING PROTECTION LETTER" is a "master" CPL that has general usage when the title insurer is providing a master CPL to a lender on one of its issuing agents or approved attorneys for all closings of real estate transactions where that insurer's policy of title insurance is specified in the closing to be issued in the transaction. This form was previously called "CLOSING PROTECTION LETTER-REGULATORY."
The "CLOSING PROTECTION LETTER-LIMITATIONS" is also a general usage form. It also provides a master CPL to a lender on one of the insurer's issuing agents or approved attorneys for all closings of real estate transactions where that insurer's policy of title insurance is specified in the closing to be issued for that transaction. This CPL provides primarily the same coverage as the first form discussed with a couple exceptions. First, this form has limitations on how much can be funded in any given closing in order for the protection of the CPL to apply. If a lender's funding in any given transaction exceeds the amount stated in paragraph 4 of this CPL there is no protection provided under this CPL for that closing. Second, this form requires that if the closing is being handled by an approved attorney, a title insurance binder or commitment for title insurance from the insuring company must have been received by the lender before the lender transmits its closing instructions. This form was previously called "CLOSING PROTECTION LETTER-NON RESIDENTIAL LIMITATIONS."
The "CLOSING PROTECTION LETTER-SINGLE TRANSACTION LIMITED LIABILITY" is a form that is issued covering only a single transaction that is identified in the CPL so it does not provide master CPL protection for all transactions. This CPL provides similar protection to the other two but on a single transaction basis. It must be issued for each transaction to be covered unlike the other two forms that are issued only once to cover all transactions. This form contains similar limitations as the last form discussed in that there is a limitation on how much money can be funded in the aggregate for the identified transaction. Likewise there is a requirement that a title insurance binder or commitment for title insurance from the insuring company must have been received by the lender prior to transmitting their closing instructions. The name for this form has not changed.
Now for the revisions. There was some re-numbering and re-lettering of paragraphs for consistency and identification purposes. However the substantive revisions are the same for all three of theses CPLs. The ALTA® has expanded the parties that are benefited by the protections of the CPL. These new forms now include not only the addressee who is a lessee, purchaser or lender of an interest in land but also the lender's assignees and warehouse lender. Also these new forms now provide protection if the loss arises out of negligence of the issuing agent or approved attorney in handling funds or documents in addition to fraud or dishonesty. The protection for loss arising out of fraud, dishonesty or negligence of the issuing agent or approved attorney in handling funds or documents in connection with the closing is limited to situations where the fraud, dishonesty or negligence relates to the status of title or the validity, enforceability, and priority of the lien of the mortgage. Also the ALTA® has added three sub-paragraphs to the Conditions and Exclusions. These result in eliminating liability for loss arising out of (i) fraud, dishonesty or negligence of the CPL addressee's employee, agent, attorney or broker, (ii) the CPL addressee's settlement or release of any claim without the written consent of the Company, and (iii) any matters created, suffered assumed or agreed to by the CPL addressee or known to the CPL addressee.
With these changes, the issuing company is providing greater protection to a potentially larger group of protected parties while limiting the coverage to matters that fall within the limits of the monoline statutes under which title insurers and their agents are licensed.
Now that the new CPL forms have been adopted, they are only available in electronic format to ALTA® Policy Forms Online Subscribers. For more information on subscribing, visit ALTA® Policy Forms Online.