I suspect that the way the Loft outer edges goes tangent to the lip is a problem. Would it be acceptable if there were an angle where the vertical walls meet the wall of the lip? Another possible fix would be to cut away the top lip where the loft would meet it, so that the loft doesn't fade away to 0 at the ends. It would probably be better to use a Boundary Surface if you try this method.
Mark's method is much easier than either of the above, if it is acceptable.