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Malpractice Insurance PolicyThe Consumer Financial Protection Bureau (CFPB) was formed by the Dodd-Frank Act.  The main intent of the CFPB was to help consumers that were having issues with Banks, Lenders and other Financial Institutions.  CFPB jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors and other financial companies operating in the United States. 

Recently a title agency was concerned about coverage for CFPB actions.  Normally there is no insurance coverage for CFPB actions or actions from other government bodies; other than possible defense costs for certain disciplinary actions.   Firm had been provided with a less expensive alternative for their renewal, but the alternative had a specific exclusion for Violation of Consumer Protection Laws.  So the title agency is reluctant to pursue this alterative quote as the current policy did not have a specific exclusion. 

According to the firm they were more comfortable with the current coverage; the rational being that the “current policy only excluded taxes, criminal or civil fines.”  Guess what CFPB actions result in civil fines imposed by law.  Even though we pointed out to the insured that effectively you have the same coverage with the exclusion as the Lloyd’s policy specifically excludes coverage for civil fines or penalties imposed by law. We even attached the specific language from their current Lloyd’s policy that shows the current policy language.

As pointed out in the past sometimes the ‘exclusion of coverage’ can be found sometimes in the definition of damages not in the ‘exclusion section’ of the policy.  With the Lloyd’s policy that is the case:

Damages means:

1.       amounts which an Insured is legally obligated to pay as a result of a covered judgment, award  or settlement;

2.       costs charged against an Insured in any suit defended by the Insurer unless such costs are assessed as a sanction for the delay or misconduct in the litigation process by an Insured;

3.       pre‐judgment interest and post‐judgment interest assessed before the Insurer has paid, offered to pay or deposited in court the part of the judgment that is covered by this Policy and that is within the applicable Limit of Liability; and

4.       punitive, exemplary or multiple damages, where insurable by law.

5.       Damages do not include:

a.         taxes, criminal or civil fines or penalties imposed by law;

b.        the cost of correcting, performing or re‐performing Professional Services; or

c.         any amounts deemed uninsurable by the law pursuant to which this policy is construed.

The insured will pay an extra $10,000 to $20,000 because they ‘hope’ that the Lloyd’s policy will provide this coverage, which it will not.

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