Loss-Payable Clause Law and Legal Definition
Loss-payable clause refers to an insurance policy provision that authorizes the payment of proceeds to someone other than the named insured. Under loss-payable clause, payment is made to someone who has a security interest in the insured property. Generally, a loss-payable clause either designates the person as a person as a beneficiary of the proceeds or assigns to the person a claim against the insurer, but the clause does not treat the person as an additional insured.
The loss-payable clause is a union or standard mortgage clause. Such a clause expressly provides that the right of the mortgagee to recover is not invalidated by any act or neglect of the owner. A loss-payable clause operates as a separate contract between the mortgagee and the insurer.[First Nat'l Bank v. Watts, 462 N.W.2d 922 (Iowa 1990)].