A trust and commission clause is a property insurance provision that clarifies coverage for certain property that the insured holds for others, such as goods held in trust, on commission, or in a similar custody arrangement. The clause helps avoid a coverage dispute where property is physically at the insured’s premises but legal ownership belongs to someone else.
Why this clause exists
Property insurance is usually written around the insured’s interest. If a business holds property for customers, principals, or other parties, questions can arise about:
- whether the insured has an insurable interest in the property
- whether the policy covers property “of others” and to what extent
- who is entitled to claim payment after a loss
The clause is designed to make the coverage intent clearer, but it does not remove the need to follow the policy’s valuation rules, limits, and conditions.
Claims handling implications
In a claim involving property held for others, insurers commonly focus on:
- documentation of the custody relationship (bailment, consignment, commission arrangement)
- proof of value and what portion of the loss is attributable to each party’s interest
- whether any specific sublimits or exclusions apply to property of others
Claims may also involve subrogation, depending on who was responsible for the loss.
Practical example
A warehouse stores goods for multiple customers. A fire damages some of those goods. A trust and commission clause can help support the argument that the policy is intended to respond to covered loss involving goods held for others, subject to policy limits and valuation.