Legal Definitions - union-loss clause

A union-loss clause is a specific provision found within an insurance policy that is designed to protect a labor union's financial interest in insured property. This clause ensures that the union's interest remains covered by the insurance, even if the primary policyholder (the entity that purchased the insurance, such as an employer or a property owner) commits an act or omission that would otherwise invalidate their own coverage under the policy.

Essentially, a union-loss clause creates a separate, independent contractual agreement between the insurer and the union. This means that the union's right to receive an insurance payout for its protected interest is not jeopardized by the actions, negligence, or misrepresentations of the primary insured party.

Here are some examples to illustrate how a union-loss clause works:

• Example 1: Union-funded training center on company property

  A large manufacturing company owns a sprawling industrial complex, which includes a state-of-the-art training facility built with significant financial contributions from the local union. The union has a long-term agreement for exclusive use of this facility for member training programs. The company holds the property insurance policy for the entire complex, and this policy includes a union-loss clause specifically naming the union as an interested party for the training facility.

  How it illustrates the term: If the company's management were to intentionally commit arson to the training facility to collect insurance money (an act that would void the company's own coverage due to fraud), the union-loss clause would ensure that the union's financial investment in the facility (e.g., for rebuilding or replacing its share of the value) would still be covered by the insurance policy. The union's claim would be processed independently of the company's fraudulent actions.

• Example 2: Union pension fund investment in commercial real estate

  A union's pension fund invests a substantial amount of its assets by purchasing a significant minority ownership stake in a commercial office building. The primary owner and manager of the building (a real estate development firm) is responsible for securing comprehensive property insurance. To safeguard the pension fund's investment, a union-loss clause is included in the insurance policy, identifying the union's pension fund as a protected party.

  How it illustrates the term: Suppose the development firm failed to disclose a known structural defect in the building during the insurance application process, which could be considered a material misrepresentation that might void their policy. If the building later suffers damage from an earthquake (a covered peril), the union-loss clause would ensure that the pension fund's financial interest in the property would still be protected by the insurance payout, even if the development firm's own claim is denied due to their prior misrepresentation.

• Example 3: Jointly owned specialized equipment

  A construction company and the local electricians' union jointly purchased a highly specialized and expensive piece of equipment for a shared apprenticeship and skills development program. The company holds the insurance policy for this equipment, but a union-loss clause is incorporated, acknowledging the union's co-ownership and financial stake.

  How it illustrates the term: If a company employee, acting negligently and outside the scope of their duties, caused severe damage to the equipment (an act that might be excluded from the company's coverage due to specific policy exclusions for employee negligence), the union-loss clause would ensure that the union's portion of the equipment's value would still be covered by the insurance policy. This allows the union to replace its share of the damaged asset, even if the company's own claim for the damage is denied.