1. Forms
2. HO
3. HO-07-52

What the form is

The HO 07 52 Loss Payable Provisions endorsement is an addition to a standard homeowners insurance policy, specifically designed to be used in conjunction with the HO 07 01 Home Business Insurance Coverage endorsement. Its primary function is to protect the financial interest of a third party, known as a loss payee or lender's loss payee, who has an insurable interest in the business property covered under the HO 07 01. If a covered loss occurs to the insured business property, this endorsement ensures that any claim payment will include the named loss payee, according to their financial stake in the property. Furthermore, the loss payee is typically entitled to receive advance notice if the policy is canceled or not renewed.

Classes of business it applies to

This endorsement is relevant for homeowners who operate an eligible business from their residence and have financed or leased business-related property, or have other contractual obligations to a third party concerning that property. It applies across various types of home-based businesses covered by the HO 07 01.

Real-world examples:

• A home-based bakery that finances commercial ovens or mixers. The finance company would be listed as a loss payee.
• A freelance photographer operating from home who leases high-value camera equipment. The leasing company would have an insurable interest.
• An IT consultant working from home who has a loan for specialized computer servers and networking equipment. The lender would be protected by this endorsement.

Special considerations

Key considerations for the HO 07 52 endorsement include:

• Prerequisite Form: It must be attached to a homeowners policy that includes the HO 07 01 Home Business Insurance Coverage endorsement. It does not function as a standalone coverage.
• Accurate Identification: It is crucial to accurately name the loss payee and clearly describe their interest in the scheduled property to ensure claims are settled correctly.
• Types of Loss Payable Clauses: The endorsement typically outlines different provisions, such as a 'Loss Payable Clause' versus a 'Lender's Loss Payable Clause'. A Lender's Loss Payable Clause generally offers broader protection to the lender, potentially allowing them to recover even if the insured's actions (like misrepresentation or breaching a policy condition) would normally void coverage for the insured.
• Notice of Cancellation: The loss payee is entitled to notification if the policy is cancelled or non-renewed, providing them an opportunity to protect their interest.

Key information for agents and underwriters

For Agents:

• Always inquire if a client with a home business (insured under HO 07 01) has any leased or financed business property. If so, the HO 07 52 is essential to protect the third party's interest and satisfy contractual requirements.
• Ensure the scheduled property values are adequate to cover the interests of both the insured and any loss payees.
• Explain the importance of this endorsement to clients who have loans or leases on business equipment.

For Underwriters:

• Verify that the underlying home business is eligible for the HO 07 01 endorsement before approving the HO 07 52.
• The presence of a loss payee can indicate a more formally structured or capitalized home business.
• Review the nature of the business and the type of property subject to the loss payable provision to assess any potential increase in risk.
• Confirm that the loss payee information is complete and accurate on the endorsement.