Joint Payee Checks
Question: We're still having problems with checks that have more than one payee. If I have a check payable to two people, or to a person and a company, how can I be sure the other endorsement is good if both are not my customers?
Answer: You've hit on one of the major problems with joint payee checks -- especially insurance checks payable to an individual and a company. If the check is going into the company account - (e.g. payable to John Doe and the ABC Car Repair Co., and the check has been endorsed by John Doe and is going into the ABC account) you probably have very little liability attached in accepting the check. At the very worst, if it comes back with a claim from John Doe, you'll charge it back to the company account and let them fight about it.
But if the check allegedly bears the endorsement of the ABC Car Repair Co., and is being deposited into John Doe's account, you should be very concerned. Depending on the amount of the check, you may want to have the endorsement of ABC notarized before accepting the check. You'll definitely want a name attached, such as "ABC Car Repair by Angelo B. Crab, Owner". You may even want to verify the endorsement with a phone call to the other payee. Sometimes the financial institution of the other payee will guarantee an endorsement for their member or customer.
Bottom line, there is no way to guarantee that other endorsement without some verification. Joint payees on checks where both payees are not your customers should be treated exactly as you do second endorsements.
Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 5, 7/04
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