Pennsylvania’s statutory definition of “insurance"

Eastern District of Pennsylvania explains that while Closing Protection Letter may be an indemnity contract, it is not an insurance policy.

In February 2006, a borrower requested a loan in the amount of $1,750,000 from plaintiff Bancorp to finance the purchase of a commercial building located in Florida. The loan application submitted to Bancorp listed the purchase price of the property as $2,100,000. Based upon this purchase price, Bancorp agreed to lend the Borrower $1,750,000, approximately 83 percent of the purchase price.

The next month, PA/NJ Abstract, Inc., the authorized Issuing Agent for Defendant Lawyers Title Insurance Corporation (“Lawyers Title”), delivered to Bancorp a commitment for title insurance for the principal loan amount of $1,750,000. This title insurance policy covered Bancorp in the event of a loss. The Issuing Agent also gave Bancorp a copy of a separate commitment for title insurance that was issued to the borrower insuring $2,100,000, the purported purchase price of the property.

Lawyers Title then issued a Closing Protection Letter (the “CPL”) to Bancorp in connection with the title insurance policy. The CPL stated that Lawyers Title would reimburse Bancorp for losses incurred in connection with the closing of the real estate transaction under either of the following two circumstances: (1) “Failure of said Issuing Agent or Approved Attorney to comply with your written closing instructions to the extent that they relate to (a) the status of title to said interest in land or the validity, enforceability and priority of the lien of said mortgage on said interest in land, or (b) the obtaining of any other document, specifically required by you, but not to the extent that said instructions require a determination of the validity, enforceability or effectiveness of such other document, or the collection and payment of funds due you”; or (2) “Fraud dishonesty [sic] of said Issuing Agent or Approved Attorney in handling your funds or documents in connection with such closing.” Read More