Closing Protection Letter (CPL)
A Closing Protection Letter (also called an "Insured Closing Letter" or "ICL") forms a contract between a Title Insurance Underwriter and a Lender, in which the underwriter agrees to indemnify the lender for actual losses caused by certain types of misconduct by the closing agent. Title Underwriters often authorize closing agents to issue these letters to Lenders when the closing agent anticipates issuing the Underwriter's title insurance policies in the transaction.
Typical closing protection letter provisions:
- Relate to the collection of funds due to the lender
- Investigate fraud or dishonesty in handling of the lender's funds or documents
CPL claims are on the rise. The CPL serves the important function of providing lenders with assurance that title agents will handle their funds and documents in an appropriate manner. However, it is important to understand that the CPL does not make the title insurance underwriter responsible for all types of errors that title agents could make. A thorough investigation of the facts of each claim, together with the careful application of the existing body of CPL law, should be used to distinguish CPL claims that should be paid from claims that should be denied.
- Serves to extend the liability of the title insurance company
- Ensures standards served to extend the liability of the title insurance company
- Assures that applicable laws and disclosures are adhered to
- Ensures compliance with the lender's closing instructions and takes responsibility for defects within the whole process
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