When any financially-related document has a blank endorsement, it has only the signature of the owner or the person who controls the benefit of the document and omits a "pay to the order of" statement. What a blank endorsement does is assign control or the benefit to whomever is in possession of the document.
An endorsement occurs when the person or persons named on a financial document as payee signs it. The endorsement allows another party to negotiate it, which is a fancy way to say that the document can be cashed or used in lieu of currency to its full value. For example, when a check is properly endorsed, it becomes a negotiable financial instrument.
There are different types of endorsements. The most common is the blank endorsement. Another common endorsement is a restrictive endorsement, in which an assigned purpose is written as a part of the endorsement. For example, the restriction that the item is "For Deposit Only." A third common endorsement is the special endorsement, in which a new payee is designated as a part of the endorsement. Under the payee's endorsement would be "Pay to the order of John Q. Public," or the like.
An endorsement must include all of the payees named on the document. Even if the payee's name is spell incorrectly, the endorsement must match exactly. When more than one payee are listed with the word "and" connecting them, both payees must sign to properly endorse the item. If the word "or" connects the payee names, only one of the payees must sign.
A blank endorsement includes only the payee's signature. A blank endorsement is also the least restrictive in that whomever is holding the document has control and authority to negotiate it, hence the term "blank check." Anyone in possession of the item has the ability to take benefit from it.
Blank Endorsed Insurance Policy
In business, the transfer of insurance policies is a common practice. This is especially true for insurance of raw materials, one of a kind products and valuable goods sent by freight. The original purchaser of an insurance policy covering goods in transit transfers the insurance policy "in blank" to the company receiving the goods. There is no specific way to execute a blank endorsement on an insurance policy, but the more common methods are: 1) to open the policy to its last page and in the white-space of the page, stamp the original payee's company name and then have an officer of the company sign it, or 2) perform this same procedure on the back of either the first or last page of the policy. Although not an insurance policy, blank endorsements are also frequently used on for an "order bill of lading." The bill of lading document declares the ownership of good in shipment and a blank endorsement transfers ownership to whomever holds the bill of lading.
Illegal Blank Endorsements
In most states of the U.S. and under several federal laws, blank endorsements are illegal for use on personal insurance policies and mortgage transfers, among other less frequently used instruments. Under many of these laws, a blank endorsement, especially one committed under duress, constitutes fraud or perhaps theft. Regardless, the laws of the land limit the use of blank endorsements to order instruments (as in "pay to the order of"), such as checks, bearer bonds, bills of lading, insurance for transferable goods and the like.
Ron Price, MBA, has extensive senior level experience in business, information technology, and education. Under his pen name Ron Gilster, Price has written over 40 books for several leading publishers on a topics ranging from business and finance to IT certifications to real estate.