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Endorsement 'Without Recourse'

Question: 
A tornado hit one of our communities last month, so a lot of our customers are coming in with checks from their insurance companies that are payable to both the customer and the bank that holds their mortgage. In a few cases, the checks are made payable without recourse. (For example: "John Doe and ABC Bank, Without Recourse".) We do not accept without recourse endorsements, but have never seen these words used in the payee section before. What is the risk to our bank (not ABC Bank) if we accept these checks for cash or deposit?
Answer: 

If an insurance proceeds check is made payable to "Borrower and Bank" it is common (and appropriate) for the bank to endorse the check "Without Recourse". As the bank is not receiving any portion of the proceeds, there is no reason why it should accept an endorser's obligation on the check.

Like you, I have never seen anyone attempt to put restrictive language in the payee line. I do not believe it enhances your risk in any way, I'm just not certain that it would work to limit your liability the way a restrictive endorsement would.

First published on BankersOnline.com 9/06/10

First published on 09/06/2010

Filed under: 
Operations
Filed under operations as: 
Checks
Endorsement
IT

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