loss payable clause
An insurance provision authorizing payment in the event of loss
to a person or entity other than the named insured having an insurable
interest in the covered property. Under a typical loss payable clause,
the insurer is under no obligation to make payment to the loss payee
if payment for a loss can be denied to the insured. This clause
is common in commercial auto and personal auto policies in which
one or more vehicles are financed through a financial services company.
The coverage afforded to the loss payee under this provision is
"as its interest may appear." In other words, it will only pay the
financial institution's actual loss sustained, even if the value
of the vehicle is greater. It does not cover the financial institution's
loss resulting from conversion, secretion, or embezzlement on the
part of the named insured. If the insurer makes any payments to
the loss payee, the insurer obtains the loss payee's (subrogation)
rights against any other party. See also
Lenders loss payable
endorsement; Mortgage (mortgagee)
clause;
Loss payee.
Links for IRMI Online Subscribers
Only:
CAI XIII.W;
CPI IV.G,
VI.I;
CRT XI.F,
XIV.D;
PRMI 6.G,
10.G