We welcome back to Christopher Boggs, Chief Consultant at Boggs Ventures and Insurance Consulting.
Banks (well, their attorney or risk manager) are making inappropriate demands from commercial borrowers. I’ve said what I said, I stick with what I said – unless someone can provide evidence to the contrary.
What led me to make this allegation? Simple, this agent is becoming increasingly common problem, reading something similar to this:
“One of our insured has received a commercial loan and the bank requires our clients to name the bank additional insurance under the General Liability Policy. What should we do?”
Why did the bank make this request? What are the possible contacts of the bank due to the borrower’s operations or activities?
Loans are weapons-length transactions between two completely unrelated entities, each working for its own self-interest.
There is no contractual relationship between the two parties and the borrower agrees to do anything represent or For the benefit Lender. Of course, there is no symbiotic relationship between all parties, because all parties need the other party to exist in order to exist.
Additional insurance status is only necessary if there is a contract or symbiotic relationship between the parties. The lender/borrower relationship is neither a contract nor a symbiotic one.
So, if neither type of necessary relationship exists, why do you need additional insurance status? There may be several possibilities:
- The lender is investigating and approving the borrower’s process and procedures; or
- The lender guarantees the safety and merchantability of the borrower’s products.
It is questionable whether lenders have the expertise and even authority to investigate and approve business methods, processes and procedures or the security of borrowers. For these purposes, there are other entities that are more suitable and created.
Therefore, the bank has No The borrower’s liability exposure to the product, service or operation. If there is no liability exposure, no additional insurance status is required.
Ultimately, there is no relationship or exposure between the lender and the borrower that requires additional insurance status. This requirement is completely inappropriate and unnecessary.
If you disagree, please give me a feasible reason or applicable case law. However, even case law is problematic. Case law is case-specific and it is wrong to create a wide range of stroke requirements based on very specific circumstances! If case law is used to support this requirement, cite the case for review.
Unless the reader provides reasonable evidence, I insist that the bank attorney and/or risk manager is unreasonable, incorrectly and firmly ask the borrower to name it as an additional insurer eligible for a bank loan. However, if reasonable evidence is provided, I will reassess my position.
I look forward to hearing from you.
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