No-Benefit-to-Bailee Clause
A provision in insurance policies that prevents third parties who have temporary custody of the insured's property from claiming benefits under the policy if they damage or lose that property. This clause ensures that insurance coverage belongs solely to the policyholder and cannot be used by bailees (such as repair shops, dry cleaners, or storage facilities) to avoid their own liability for property in their care.
Example
“When the auto repair shop accidentally damaged Sarah's engine, they couldn't file a claim under her comprehensive coverage due to the No-Benefit-to-Bailee Clause, forcing the shop to use their own garage liability insurance to pay for the repairs.”
Memory Tip
Think 'NO BAIL = No Benefits Available for Items Loaned' - businesses can't bail themselves out using your insurance when they damage your stuff.
Why It Matters
This clause protects you from having claims on your policy that could increase your premiums or count against your claims history when the damage was actually caused by a business's negligence. It ensures that businesses maintain proper liability insurance to protect customers' property rather than relying on customers' coverage as a safety net.
Common Misconception
Many people think this clause means they have no coverage when their property is damaged while in someone else's care, but the clause only prevents the business from filing claims on the customer's policy - the customer can still file their own claim and the insurer will pursue the negligent business for reimbursement. Some also believe it eliminates all coverage for property away from home, but it specifically addresses who can claim benefits, not what situations are covered.
In Practice
When Maria's $15,000 wedding dress is destroyed by a fire at the dry cleaner, the shop's manager tries to file a claim under Maria's homeowners policy to avoid using their business liability coverage. Due to the No-Benefit-to-Bailee Clause, Maria's insurer rejects the shop's claim but approves Maria's claim for the full $15,000. Her insurance company then subrogate against the dry cleaner's business insurance to recover the payment, keeping Maria's claims history clean while ensuring the negligent business bears responsibility.
Etymology
The term 'bailee' comes from legal terminology dating to medieval English law, derived from French 'bailler' meaning to deliver or entrust. The insurance clause developed in the 20th century as insurers sought to prevent bailees from using customers' insurance as a substitute for their own business liability coverage.
Common Misspellings
Compare insurance quotes and save
Related Terms
More in insurance
Other insurance terms you should know
See Also
Need help with spelling?
Instant spelling checker with dialect variants for 2,000+ words.