ISO · Commercial Property
CP 12 18
Loss Payable Provisions
Loss Payable Provisions (ISO Commercial Property)
Specifies how loss payments are made between the named insured and a designated third party (loss payee, lender, or mortgagee).
What it does
CP 12 18 governs the payment of property insurance proceeds when a third party has a financial interest in the insured property. The form offers four options: Loss Payable (simple direction to pay both), Lender's Loss Payable (full mortgagee protection — paid even if insured violates policy terms), Contract of Sale (for installment-sale property), and Building Owner Loss Payable (for property tenants are required to insure). Lenders and CMBS servicers universally require Lender's Loss Payable. The form does not grant insured status — just a payment direction and, in the Lender's Loss Payable option, certain mortgagee protections.
When you need it
- Commercial mortgages — lenders require Lender's Loss Payable status to protect their secured interest in the property.
- Equipment financing — equipment lessors require Loss Payable on the policy covering the leased equipment.
- Buyer/seller arrangements under installment-sale contracts where the seller retains a security interest.
Common mistakes
- Listing the lender as Loss Payable instead of Lender's Loss Payable — the latter has the mortgagee protections; the former does not.
- Omitting the lender from the policy entirely and relying on a certificate notation — the lender must be on the actual endorsement.
- Confusing Loss Payable (property — payment direction) with Additional Insured (liability — coverage extension) — different lines, different effects.
Verifying CP 12 18 on a real certificate?
Bindly Compliance auto-verifies endorsement attachment, named parties, and edition dates on every COI we track. Description-only language and missing forms surface as deficiencies in your dashboard before they become claims.