Can the Closing Protection Letter provide broader coverage than simply indemnity against settlement fund issues?

The Closing Protection Letter (CPL) is primarily designed to provide indemnity to a party for losses that may arise from certain actions of the settlement agent, particularly concerning the handling of settlement funds. Its main purpose is to protect against risks such as misappropriation of funds or failure to follow necessary closing instructions.

The coverage offered by a CPL is typically limited to these specific concerns regarding the settlement process. It does not extend to additional areas outside of this realm, such as issues related to title defects or other types of liability that may not be explicitly associated with the handling of funds at closing. Therefore, it cannot provide broader coverage, as its function is confined to the indemnification against issues directly tied to the settlement process.

Understanding this limitation is crucial for those engaging with property transactions, as it clarifies the extent of protection they can expect from a Closing Protection Letter when closing a transaction.