At our recent Activate Conference, I had the opportunity to present something that has been quietly bothering me since the day I began reviewing private lending files at Geraci LLP.
Before moving to California, I practiced law in Toronto, Canada for twenty years, and my practice focused almost entirely on insurance law. My work involved insurance coverage disputes, claims litigation, and reviewing policies to determine whether losses were covered or excluded. Because of that background, when I joined Anthony Geraci and began reviewing private lending transactions, one of the first questions that naturally came to mind was simple: Who reviews the insurance policy?
To my surprise, the answer was often no one.
Private lenders are rightly focused on ensuring that the fundamentals of their transactions are strong. Loan documents are carefully drafted, collateral is analyzed, and exit strategies are considered. But the insurance policy protecting the collateral—the very asset securing the loan—is typically obtained by the borrower and simply assumed to be adequate. From an insurance lawyer’s perspective, that assumption immediately stood out to me as a significant exposure.
Why This Issue Became Obvious to Me
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After my presentation at Activate, one attendee asked a fair question: “If this is so important, why hasn’t anyone raised this before?”
The answer is simple. After spending two decades reviewing insurance policies and litigating coverage disputes, the exposure was obvious to me. I have seen too many situations where parties believed they had insurance coverage, only to discover after a loss that the policy did not respond the way they expected.
When that happens, the consequences are rarely straightforward. As a civil litigator, when coverage fails or a claim is denied, the next step is often to look for others who may bear responsibility—insurance brokers, agents, insurers, or other professionals who may have contributed to the problem. Litigation may follow and sometimes compensation can be recovered. But even when recovery is possible, the reality is that the time lost, the aggravation, the heartache, and the full financial loss are rarely ever fully recovered.
In many cases, the damage to the lender’s position has already been done and the most frustrating part is that many of these situations could have been avoided entirely.
The Example That Resonated With Lenders
To illustrate the issue during the conference, I shared a scenario that every private lender in the room immediately understood.
Imagine you are a private lender who has just closed a $1 million loan to Joe. You retained Geraci LLP to prepare the loan documents, and as always, the documents are airtight. The deed of trust is recorded, the guaranties are in place, and the transaction is structured exactly the way it should be.
A few months later, there is a fire at the property.
Naturally, you assume the insurance policy will respond. After all, the borrower obtained insurance and you were listed as the lender. But when the claim is submitted, the insurer advises that it is “investigating.”
Then Joe—the borrower—suddenly disappears.
So you call Anthony Geraci and ask the obvious question: What should we do?
Anthony gives the correct legal answer: foreclose.
And he is right.
But the real question is this:
What exactly are you foreclosing on?
A pile of ash?
And more importantly, is that pile of ash worth the $1 million you lent?
A Changing Insurance Landscape
This issue has become even more significant in today’s insurance environment. Across North America, insurers are tightening underwriting standards as climate-related events, natural disasters, and increasing claims severity reshape the risk landscape. Coverage exclusions are becoming more common, policies are increasingly complex, and in some markets, insurers are withdrawing entirely.
In this environment, assuming adequate insurance protection exists simply because a policy was obtained is becoming increasingly risky.
Introducing the Geraci LLP Integrated Approach
That reality is exactly why Geraci LLP introduced what we call the Geraci Integrated Approach.
Our philosophy is captured in a simple principle: Secure the loan. Protect the collateral.
For the first time in the private lending space, we are integrating insurance risk analysis with loan documentation before the transaction closes.
Under this approach, Geraci LLP reviews the borrower’s insurance policy to determine whether the collateral securing the loan is actually protected. From that review, we generate a Geraci Risk Score and a Geraci Insurance Risk Report identifying potential coverage gaps, areas of concern, and recommendations.
Where appropriate, the report may also include suggested provisions that can be incorporated into the loan documents to further protect the lender’s position.
Most importantly, the lender remains in control. Our role is not to dictate how lenders structure their transactions, but rather to provide the information necessary to make an informed decision before closing. Lenders can decide whether the borrower should address the insurance issues, whether additional contractual protections should be added, or whether they are comfortable proceeding with the loan as structured.
The difference is that the decision is now based on knowledge rather than assumption.
The Next Evolution of Private Lending
Private lending has evolved dramatically over the past decade. The industry has become more sophisticated, and lenders today approach transactions with a level of professionalism and strategic thinking that did not exist in earlier years.
At Geraci LLP, we believe the next step in that evolution is true risk integration—ensuring that loan documentation and insurance protection work together to safeguard the lender’s investment.
Because at the end of the day, a lender’s security interest is only as strong as the protection surrounding the asset that secures it.
And that is precisely what the Geraci LLP Integrated Approach is designed to provide.
Secure the loan. Protect the collateral.
What is the Geraci Risk Score™?
The Geraci Risk Score™ is a proprietary insurance risk evaluation developed by Geraci LLP to help private lenders understand the insurance protection associated with the collateral securing their loans.
Through a review of the borrower’s insurance policy, Geraci LLP evaluates factors such as:
- lender protections and endorsements
• property coverage limits
• exclusions and risk gaps
• liability and hazard coverage
• policy structure and underwriting considerations
The result is a clear, practical assessment of insurance risk, accompanied by a Geraci Insurance Risk Report outlining recommendations and suggested protections.
The lender then decides whether to require changes to the insurance coverage or proceed with the transaction with full knowledge of the risks involved.
Because informed lending decisions start with understanding the full risk picture.
