Risk Of Loss Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Risk Of Loss, written in plain English, along with examples of how it is used.
What is Risk Of Loss?
(n) Risk of loss is the responsibility assumed by a holder of a property, possessor insurer for compensating the loss incurred to such property during the period of such custody, holding, usage or coverage.
History and Meaning of Risk Of Loss
The concept of risk of loss stems from the legal principle that a person who has control over property assumes the responsibility for any damage or loss that occurs to that property. This can apply to a wide range of situations, from a person who borrows a friend's car to a business that purchases goods from a supplier. In these cases, the borrower or buyer assumes the risk of loss for the duration of their use or ownership of the property.
In legal terms, risk of loss refers to the responsibility assumed by the holder or possessor of property for compensating any loss incurred to the property during the period of custody, holding, usage or coverage. This means that if a property is lost, stolen or damaged, the person who has control over the property must bear the financial burden of repairing or replacing it.
Examples of Risk Of Loss
- A car rental company assumes the risk of loss when it rents out a vehicle to a customer. If the car is damaged or stolen while in the customer's possession, the rental company will be responsible for the cost of repair or replacement.
- A homeowner assumes the risk of loss for their property and possessions, including damage from natural disasters or theft. This is why homeowners insurance policies exist, to cover the cost of repair or replacement in case of loss.
- A business that imports goods from overseas assumes the risk of loss during shipping. If the goods are damaged or lost during transit, the buyer may be responsible for filing a claim with the shipping company or supplier to recoup their expenses.
Legal Terms Similar to Risk Of Loss
- Liability: Refers to legal responsibility for one's actions or failure to act.
- Indemnity: Refers to the obligation to compensate for loss or damage resulting from a contract or legal obligation.
- Hold harmless: Refers to an agreement in which one party agrees not to hold another party responsible for any damages or losses that may occur.