Who’s Really Insured? — When the Policy Lists Two Names

Intro:

Sometimes a small wording twist in an insurance document can spark big compliance headaches. One reader recently asked whether an insurance policy showing both the beneficiary and the issuing bank as insured parties meets LC requirements. Let’s see what Mr. Old Man has to say.

QUESTION

Dear Mr. Old Man,

Warm greetings. I hope this message finds you well.

I would be grateful if you could kindly share your expert opinion on the following query:

The LC requires the insurance policy/certificate to be “issued or endorsed to the order of XYZ Bank (Issuing Bank).”

Based on this clause, the insurance document could either:

• show the assured as the beneficiary and be endorsed to the order of XYZ Bank by the beneficiary, or
• show the assured directly as “To the order of XYZ Bank.”

In the presented document, the details appear as follows:

Insured: ABC Co. Ltd. (the LC beneficiary)

Additional Insured: To the order of XYZ Bank (Issuing Bank)

There is no endorsement by the beneficiary.

Would this insurance document be considered inconsistent within itself due to mentioning two assured parties — the beneficiary and the issuing bank?

I would appreciate your expert view on this point.

Best regards,

Priya

_______

ANSWER

Dear Priya,

Thank you for your question. Here is my view:

The insurance document showing both “ABC Co. Ltd. (beneficiary)” and “To the order of XYZ Bank” as insured parties creates ambiguity and does not comply with the LC requirement.

To satisfy the LC, the document should either:

• show XYZ Bank directly as the insured party, or
• show the beneficiary as insured and be endorsed to the order of XYZ Bank.

Since it is not endorsed by the beneficiary, the presented document is not in compliance with the LC terms.

Best regards,

Mr. Old Man