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Ex gratia payment: What does it mean?

[ecis2016.org] An ex gratia payment is a way to settle claims by offering a one-off sum of money.

Ex gratia payment: What is it?

An ex gratia payment is a way to settle claims by offering a one-off sum of money in insurance, employment, and the law. These payments are made out of the goodwill of an individual or organisation and not as a condition of a contract.

The term comes from the Latin phrase ex gratia which means by favour. The party providing the payment is not legally required to compensate the recipient, but does it out of kindness or consideration. 

Ex gratia payments: Overview

Ex gratia payments are voluntary, making them different from legally mandated payments. These payments will only be provided if the recipient is deserving of it and the donor does not need to make such an offer.

If an insurance policyholder suffers from a covered injury, the insurer must pay for the claim. This type of payment is not voluntary. Rather, it is the outcome of a legal obligation and will typically carry an admission of liability.

Ex gratia payments are considered a form of compensation or restitution made without any admission of fault or wrongdoing. These payments can include cash and non-cash transfers, such as repair or replacement of property. A company producing a one-time credit to its customers would not be making an ex gratia payment as the payment is not related to a particular incident. A company that presents a credit after a service disruption would be considered to be making an ex gratia payment.

Source: https://ecis2016.org/.
Copyright belongs to: ecis2016.org

Debora Berti

Università degli Studi di Firenze, IT

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