PDC

Pending Disbursement Clauses

Pending disbursement clauses are inserted in Loan Policies when future disbursements of loan proceeds are contemplated. These proceeds may be advanced for construction or other purposes. The Company generally uses special pending disbursement clauses on construction loans that require downdates. Where the future advances do not relate to construction, the pending disbursement clause does not require a downdate, although such downdate is sometimes done. In some western states, pending disbursement clauses are not usually included in the Policy, even if advances are made for construction.

Exception

PDCX01 ALTA

Loan Policy – No Downdate Required

Pending disbursement of the full proceeds of the loan secured by the mortgage described is Schedule A, this Policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without knowledge of any defects, liens or encumbrances on the title, up to the face amount of the Policy. Nothing contained in this paragraph limits any exception or any printed provision of this Policy.
Comment: This clause is appropriate if the loan is not a construction loan or if the construction mortgage has and will retain priority for future good faith disbursements.

PDCX02 ALTA

Loan Policy – Construction – Downdate Required

Pending disbursement of the full proceeds of the loan secured by the mortgage described in Schedule A, this Policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without knowledge of any defects, liens or encumbrances on the title, up to the face amount of the Policy. At the time of each disbursement of the proceeds of the loan, the title must be continued down to that time for defects, liens or encumbrances on the title intervening or recorded between Date of Policy and the date of the disbursement.
Comment: This clause is used if the construction loan mortgage has initial priority, but priority may be lost because of knowledge, recorded claims, or optional disbursements, and where the construction loan mortgage does not have initial priority but the Company approves this limited coverage.

PDCX03 ALTA

Owner’s Policy – No Downdate Required

Liability hereunder at the date hereof limited to $____________. Liability shall increase as contemplated improvements are made so that liability hereunder shall be limited to that sum plus the amount actually expended by the insured in improvements in good faith and without knowledge of any defects, liens or encumbrances on the title at the time the expenditure occurs. In no event shall the liability of the Company hereunder exceed the face amount of this Policy. Nothing contained in this paragraph shall limit any exception or any printed provision of this Policy.
Comment: You should use this exception in the Owner’s Policy if the amount of insurance includes contemplated improvements. You may not delete the standard mechanics’ lien exception from that Policy without approval by the Company.

PDCX04 STG

Loan Policy – Downdate Not Required

PDCX06 STG

Loan Policy – Construction; Downdate Required;

Pending disbursement of the full proceeds of the loan secured by the Mortgage or Deed of Trust described in Schedule A, this Policy insures only to the extent of the amount actually disbursed. This Policy insures against loss or damage which results from claims of mechanics’ or materialmen’s liens arising from non-payment of bills for labor performed or material furnished prior to ____________________, except any such liens or notices thereof as may be recited under Schedule B hereof. At the time of each disbursement of proceeds of the loan, an endorsement to this Policy must be secured increasing the amount insured hereunder up to the face amount of the Policy, subject to the following requirements being met before issuance of such endorsement: (a) the Company is furnished evidence from the insured certifying that the disbursement has been made in good faith and without knowledge of any defect in, or objection to the title, (b) a title search is made by the Company that reveals no liens, objections or any adverse changes in the title, (c) the contractor and owner furnish the Company satisfactory paid bills, lien waivers, estoppel certificates and other evidence that all items, from which a lien might arise, have been paid or otherwise satisfied, and (d) the Owner and Contractor furnish the Company satisfactory Affidavit and Indemnity Agreement(s) as to the matters referred to in (c) above. This Policy does not insure against mechanics’ and materialmen’s liens for labor performed and materials furnished subsequent to the last date to which mechanics’ lien coverage has been extended, nor does this Policy insure completion of the improvements in progress, or their compliance with plans and specifications. The Company in no way guarantees the sufficiency of the mortgage proceeds as adequate to complete improvements. Notwithstanding any other language contained in the insuring provisions of this Policy, the above provisions are the sole provision applicable to coverage for loss or damage resulting from mechanics’ or materialmen’s liens or claims not of record.
Comment: This clause is designed for issuance subject to approval by the Company if the construction mortgage does not have priority over mechanics’ liens (e.g., recordation after commencement in some states; unfavorable law in states such as Colorado, Missouri, Virginia, and other states). It provides insurance only for claims because of prior work or materials.

PDCX07 STG

Loan Policy – Construction; Coverage Only for P

Pending disbursement of the full proceeds of the loan secured by the mortgage described in Schedule A, this policy insures only to the extent of the amount actually disbursed. This policy insures against loss or damage which results from claims of mechanics’ or materialmen’s liens arising from nonpayment of bills for labor performed or material furnished prior to ________________, 19____, but said coverage is limited to mechanics’ and materialmen’s liens by those persons or entities receiving said payments directly from the Insured pursuant to written disbursement authorization approved by the Insured herein; except any such liens or notices thereof as may be recited under Schedule B hereof. At the time of each disbursement of proceeds of the loan, an endorsement to this policy must be secured increasing the amount insured hereunder up to the face amount of the Policy, subject to the following requirements being met before issuance of such endorsement:
(a) the Company is furnished evidence from the Insured certifying that each disbursement has been made in good faith and without knowledge of any defect in, or objection to title,
(b) a title search is made by the Company that reveals no liens, objections or any adverse changes in the title,
(c) the contractor and owner furnish the Company satisfactory paid bills, liens waivers, estoppel certificates and other evidence that all items from which a lien might arise, have been paid or otherwise satisfied, and
(d) the Owner and Contractor furnish the Company satisfactory updated Affidavit and Indemnity Agreement(s) as to the matters referred to in (c) above.
This Policy does not insure against mechanics’ and materialmen’s liens for labor performed and materials furnished subsequent to the last date to which mechanic’s lien coverage has been extended, nor does this Policy insure completion of any improvements contemplated by the Owner, Contractor or Insured, or their compliance with plans and specifications. The Company in no way guarantees the sufficiency of the mortgage proceeds as adequate to complete improvements. Notwithstanding any other language contained in the insured provisions of this Policy, the above provisions are the sole provisions applicable to coverage for loss or damage resulting from mechanics’ or materialmen’s liens or claims therefor not of record.
Comment: This clause is designed for issuance subject to approval by the Company if the construction mortgage does not have priority over mechanics’ liens (e.g., recordation after commencement in some states; unfavorable law in states such as Colorado, Missouri, Virginia, and other states) and where the Company is unwilling to provide coverage for claims by all claimants because of prior work or materials (e.g., the Company is not satisfied with adequacy of loan funds, financial strength of indemnitors, or disbursement procedure). It provides insurance only for claims because of prior work or materials furnished by specific claimants paid directly by the insured. The Company generally requires waivers from and confirms payment to those persons. It does not insure against claims by other contractors or subcontractors, or claims for subsequent work or material.

Note: You may add additional local exceptions here. Please consult with our underwriting personnel in preparing appropriate provisions.