insurance

No-Benefit-to-Bailee Clause

An insurance policy provision that prevents a bailee (someone temporarily holding another person's property) from making claims or receiving benefits under the property owner's insurance policy. This clause ensures that bailees must carry their own insurance coverage for property in their care, custody, or control.

Example

“The dry cleaner couldn't claim on the customer's homeowners policy for the damaged wedding dress because of the no-benefit-to-bailee clause.”

Memory Tip

Remember 'Bailee = Borrower gets no Benefit' - the person temporarily holding your stuff can't use your insurance.

Why It Matters

This clause protects insurance companies from duplicate claims and ensures that businesses handling customers' property maintain adequate coverage. It also prevents bailees from being careless with others' property knowing they could rely on the owner's insurance.

Common Misconception

Many business owners think they're protected when handling customers' property because the customer has insurance. The no-benefit-to-bailee clause means the business owner is responsible for any damage and must have their own specialized bailee coverage.

In Practice

A jewelry repair shop was holding a customer's $15,000 diamond ring when a fire damaged the store. The customer's homeowners insurance included a no-benefit-to-bailee clause, so it wouldn't cover the ring while in the jeweler's possession. Fortunately, the jewelry shop had purchased bailee coverage for up to $50,000, which paid the full $15,000 claim. Without this specialized coverage, the jeweler would have been personally liable for replacing the customer's ring, potentially facing a lawsuit for the full replacement value.

Etymology

Derives from 'bailee' in legal terminology, from Old French 'bailler' meaning to deliver or entrust, combined with 'clause' from Latin 'claudere' meaning to close or conclude, referring to a contract provision about entrusted property.

Common Misspellings

No-Benefit-to-Bailey ClauseNo-Benefit-to-Baile ClauseNo-Benifit-to-Bailee ClauseNo-Benefit-to-Bailee Claus

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