Insurance-related jargon can be intimidating, as its misuse could be severely consequential to your business. The term “loss payee,” for instance, is often used interchangeably with “additional insured,” albeit erroneously.
In an insurance policy or contract, the loss payee is the party to be paid out in the event a claim is filed. This may be the insured, or a third party entitled to payment. The distinction of loss payee simply means the named party can expect reimbursement from the insurance carrier in the event of a loss.
What Is a Loss Payee Clause?
A loss payee clause is an insurance policy or contract stipulation stating that in the event of a payout made under the policy regarding the insured risk, reimbursement will be given to a third party instead of the policy owner.
When Does the Title of Loss Payee Matter?
Using real estate as an example, there are two scenarios landlords must consider:
- A tenant is only insuring their own personal business personal property.
- A tenant is insuring the property or structure itself.
When it comes down to what is included in insurance policies, these two situations should be approached differently.
For commercial purposes, it is logical for a party with insurance-related or financial risk attached to a property to request the title of loss payee on a policy. An example of when it makes sense to add such a party as a loss payee is when a lender finances a property. So, if a tenant is insuring the property or structure itself, the landlord has a financial interest at stake and should be listed as both an additional insured (on the general liability policy) and as a loss payee on the property policy.
On the other hand, it is not necessary for landlords and property managers be listed as a loss payee on a tenant’s business personal property policy if they do not have any financial interest in the property itself.
Is the Loss Payee Responsible for Filing a Claim?
The insured is usually responsible for filing a claim in the event a loss occurs. However, if the insured party does not file a proof of damage or loss in a timely fashion, the loss payee adopts responsibility for filing the claim.
Note: The insurer may make separate payments to the insured party and the loss payee.
How BCS Helps
Correction is key to achieving the highest standard in third-party liability risk mitigation. Unlike other insurance tracking companies, BCS combines best-in-class software with outstanding customer support to deliver a full-service compliance solution. BCS gives you the tools to collect and monitor your insurance documents, and the manpower to review and correct them.
The BCS App is designed to provide best-in-class customer service to your vendors and tenants, while enabling you to free up your people to continue focusing on delivering value to your customers. Schedule a demo today.