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IN THE SPOTLIGHT
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Ethan W. Smith is a partner in the law firm of Starfield & Smith, P.C., where his areas of practice focus on government guaranteed lending, commercial lending, banking, real estate and commercial law. Ethan has closed thousands of government guaranteed loans on behalf of his lender clients, assists lenders nationwide with SBA guaranty purchase issues and has been retained as an expert witness on SBA related litigation matters. Ethan is a licensed title insurance agent for Chicago Title and Fidelity National Title in both Pennsylvania and New Jersey. He is a member of the National Association of Government Guaranteed Lenders (NAGGL) and is a frequent speaker and serves as a member of its Associate Member Committee. Ethan is also an affiliate member of the National Association of Development Companies (NADCO), is a member of its Attorney Advisory Council and is qualified as a designated closing attorney for the SBA 504 Program. During the years 2005-2011, Ethan was honored by being named a Pennsylvania "Rising Star" by Philadelphia Magazine and is rated by Martindale Hubbell as an "AV Preeminent" attorney. He earned his B.A. degree from Johns Hopkins University, Baltimore, Maryland and J.D. degree from the College of William and Mary School of Law.
ADMISSIONS:
- Pennsylvania
- New York
- Federal District Court for the Middle District of Pennsylvania
To read more about Ethan, click here.
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FEATURED ARTICLE 
Best Practices: Lenders' duty to give timely notice of potential title insurance claims
By: Victor A. Diaz, Esquire
On October 21, 2015, Starfield & Smith published an article on title insurance coverage. Attorney Jessica Conn correctly described title insurance as covering only actual losses sustained by lenders. As with all polices of insurance, coverage is subject to the exclusions, exceptions and conditions of the policy. This article will cover one of the key conditions of every lender's title insurance policy: the duty of an insured lender to furnish timely notice of potential claims.
Most title insurance policies covering lenders contain a "Conditions Section" which may read something like this:
"NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT. The Insured shall notify the Company promptly in writing (i) in case of any litigation as set forth in Section 5(a) of these Conditions, (ii) in case Knowledge shall come to an Insured of any claim of title or interest that is adverse to the Title or the lien of the Insured Mortgage, as insured, and that might cause loss or damage for which the Company may be liable by virtue of this policy, or (iii) if the Title or the lien of the Insured Mortgage, as insured, is rejected as Unmarketable Title. If the Company is prejudiced by the failure of the Insured Claimant to provide prompt notice, the Company's liability to the Insured Claimant under the policy shall be reduced to the extent of the prejudice." (Emphasis added)
Simply stated, the paragraph means that lenders must notify title insurers of any potential claim as soon as they are aware that a claim may exist. Even if the potential of loss to a lender appears unlikely, it would be wise for lenders to provide notice of claim to the title insurance company. The obligation of the lender to give timely notice of a potential claim is designed to furnish the insurance company with an opportunity to investigate the circumstances giving rise to the claim so that it may protect its interests. Insurers have successfully defended lender claims when they can demonstrate they were unable to take action which could have mitigated or avoided the loss. Consequently, if an insurer can establish that it was prejudiced by the failure of the lender to provide timely notice, such failure may allow the insurance company to deny or reduce coverage of the claim.
In order to be effective, the notice must be in writing and sent to the address of the insurer appearing in the notice paragraph of the Conditions Section of the policy. It should be sent via registered mail or some other method with of delivery. Notice may not be effective if sent to the agent who issued the policy. Similarly, notices sent via facsimile or electronic mail may be ineffective as not in compliance with the express language of the policy.
By providing notice of a potential claim in the manner prescribed by the policy, lenders will protect their interests by preserving their contractual right to coverage under the policy.
For more information on title insurance coverage issues, please contact Victor at vdiaz@starfieldsmith.com or at 407-667-8811.
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SEMINARS & EVENTS
401K and ESOP as Equity Injection
Presented By: SBA Georgia District Office Instructor: Ethan W. Smith Date: January 7, 2016 @ 9:30am EST Location: Webinar
For more information about this event and/or to register, click here.
10 Pitfalls in Determining 7(a) Eligibility
Presented By: SBA West Virginia District Office Instructor: Ethan W. Smith Date: February 9, 2016 @ 11:00am EST Location: Webinar
For more information about this event and/or to register, click here.
SBA Lenders Leadership Summit
Presented By: NAGGL Date: February 16, 2016 - February 17, 2016 Location: Hyatt Regency Orlando, FL
For more information about this event and/or to register, click here.
2016 Southeastern Small Business Lenders Conference
Presented By: Georgia Lenders Quality Circle Date: March 6, 2016 - March 8, 2016 Location: West Hilton Head Island, SC
For more information about this event and/or to register, click here. |
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WHAT OUR CLIENTS SAY...
Donald Tyson / Senior Vice President / The Bancorp Bank
When The Bancorp Bank made the strategic decision in 2009 to become a national SBA lender, our first call was to Ethan Smith at Starfield & Smith. I had worked with Ethan in deals where he represented the SBA lender and was impressed by the firm's capacity to handle a particularly complicated management buy-out with multiple layers of financing provided by multiple firms. This deal involved a credit line, an SBA term loan, a mezzanine loan, and private equity from multiple investors, not to mention an obstinate seller. The legal side of the deal could not have gone more smoothly. Bancorp's SBA team has been very successful and we have relied on the guidance of Starfield & Smith every step of the way. They work to earn our trust every day and we could not be more pleased with our relationship with them. They have a well earned national reputation for expertise in SBA lending that is unmatched.
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