Insurance Law-Assignment

7/29/2019 Insurance Law-Assignment

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15. Assignment

Can you assign an existing policy to a third party?

- Most policies are non-assignable. Policy based on personal characteristicsQuestions to ask

- How about the requirement of insurable interest?- If an insured sells the insured property, can he maintain a valid claim against the insurer?

Can an insured assign the policy to the purchaser?Ecclesiastical Commissioners v. Royal Exchange (1895) 11 T.L.R. 476.

- Charles J.: Once a vendor conveyed insured property to a purchaser, thepolicy lapsedas thevendor could no longer claim an indemnity under the policy.

- Certain farm buildings in Kent were transferred by the Dean and Chapterof the CathedralChurch of Canterburyto the Ecclesiastical Commissioners. The transfer was effected on

August 17by publishing the scheme in the London Gazette.

- Buildings were insured under afire insurance policytaken out by the Dean and Chapter. Twodays after the transfer, the farm was destroyed by fire.

- An action was brought by both the transferorand the transferee against the insurers.- ASK: Why couldnt the purchaser sue?

North of England Pure Oil Cake Co. v. Archangel Maritime Insurance Co. (1875) L.R. 10 Q.B. 249.

- Court: When goods wereput on board a buyers lighter, property passed to the buyer.Vendors insurance policy ceased and the policy lapsed. The assignment of the policy was of

no avail.

- Vagliano Brothers insured a cargo of linseed on its voyage from Constantinople to the U.K.- On February 17, 1872, Vagliano sold the goods to the plaintiffs in London. On February 28, a

lighter carrying the goods sankoff the plaintiffs' wharf.

- InJune, 1872, Vagliano Brothers handed the policy to plaintiffs; and on October 17, thepolicy was assigned to the plaintiffs.

- This seems to suggest that you can assign a policy before it has lapsed?Sadler's Co. v. Badcock (1743) 2 Atk. 554.

- Lord Hardwicke: Under an indemnity policy, an insured must have an interest in the insuredpropertyat the time of the loss.

- A tenant took a lease on a house for under 7 years. Premises were insured for 7 years, and atthe expiry of the lease, the policy had not run out. House was destroyed by fire just after the

termination of the lease.

- After the fire, tenant assigned the policy to the landlord.- Insurers: The insured had no interest in the insured property at the time of the fire so there

was nothing she could assign after the fire.

- Thus, you need policy and subject matter in existence.


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Formalities for assignment of insurance policies- How is it assigned?

Policies of Assurance Act (Cap. 392) S. 73, Conveyancing and Law of Property Act, Cap. 61 (1994). S. 49M and 49N, Insurance Act, Cap. 142 (2002).

Re Williams (1917) 1 Ch.D 1 ECA

- English Court of Appeal: An assignment of a life policy by way of gift was revocable if theassignor did not take all the necessary steps to perfect the gift. An imperfect gift was

revoked upon the assureds death.

- A Mr. Williams handed his life assurance policy to his housekeeper intending to make a giftof the policy to her.

- Indorsement on the policy: I authorise Ada Maud Ball, my housekeeper, to draw thisinsurance in the event of my predeceasing her

- Insurers were not informed about the assignment.- Assured died in 1916, and his executor, sought to determine the validity of the assignment.

S. 5, Policies of Assurance Act

- Any such assignment may be made either by endorsement on the policyor by a in the wordsor to the effect set separate instrumentout in the Schedule, such endorsement or separate

instrument being duly stamped.


- Any person or corporation now being or hereafter becoming entitled, by assignment orother derivative title, to a policy of life assurance, and possessing at the time of action

brought the right in equity to receive and the right to give an effectual discharge to the

assurance company liable under such policy for moneys thereby assured or secured, shall be

at liberty to sue at law in the name of such person or corporation to recover such moneys.


- No assignment made after the passing of this Act of a policy of life assurance shall confer onthe assignee therein named, his executors, administrators, or assigns, any right to sue for

the amount of such policy, or the moneys assured or secured thereby, until a written notice

of the date and purport of such assignment has been given to the assurance companyliable

under such policy at its principal place of business for the time being; and the date on which

such notice was received shall regulate the priority of all claims under any assignment; and a

payment bona fide made in respect of any policy by any assurance company before the date

on which such notice was received shall be as valid against the assignee giving such notice as

if this Act had not been passed.

Spencer v. Clarke (1878) 9 Ch.D 137.

- Hall V.-C.: An agreement to assign a life insurance policy created a equitable assignment.Priority as between equitable assignees was governed by the rules of equity.


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- Plaintiffs advanced 1,000 to a Mr. Clarke against the security of two life assurance policiesfor 500 each.

- Clarke delivered one policy to the plaintiffs and as to the second policy, he claimed that hehad left it at home.

- Plaintiffs informed the insurers that the two policies were deposited with them as securityfor the loan.

- Clarke had earlier deposited the second policy with a Mr. Tranter as security for a loan of100.

- When Clarke died, the plaintiffs claimed that they were entitled to priority over the secondpolicy.

S. 50, Marine Insurance Act

- (1) A marine policy is assignable unless it contains terms expressly prohibiting assignment;and it may be assigned either before or after loss....

- (3) A marine policy may be assigned by indorsement thereon or in other customary mannerAssignment of choses in actionRegulated by statute, not common law

- Basically says that as long as you give notice to the debtor, can sue in your own name.- This means that if the insurer owes you a debt, can assign that just by giving notice.- Does not apply for negotiable instruments

S. 4(8), Civil Law Act

Any absolute assignmentby writing under the hand of the assignor, not purporting to be by way of

charge only, ofany debt or other legal chose in action of which express notice in writing has been

given to the debtor, trustee or other person from whom the assignor would have been entitled to

receive or claim such debt or chose in action, shall be and be deemed to have been effectual in law,

subject to all equities which would have been entitled to priority over the right of the assignee under

the law as it existed before 23rd July 1909 topass and transfer the legal right to such debt or chose

in action, from the date of such notice, and all legal and other remedies for the same, and the power

to give a good discharge for the same, without the concurrence of the assignor.

What can be assigned?

Life PoliciesThey may be assigned

- What is the authority?- Must complete formalities?

If not equitable title. Which means someone else takes precedence over you if they takefirst, possibly.

See Re Williams


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What are the reasons for allowing a life insurance policy to be assigned?

- Marine Policies - Similarly, why are marine insurance policies assignable?- PCC says arguably its because the risk is the same! As opposed to say a motor insurance

policy, where the insured will be different. An insurer should not be forced to take on a

different risk.

Likewise for marine insurance, the master of the ship remains the same Risk is not the same.

Re Moore (1876) 8 Ch. D. 519.

Williams v. Thorp (1828) 2 Sim 257.

Haas v. Atlas Insurance [1913] 2 K.B. 209.

Re Turcan (1888) 40 Ch.D. 5.

- It was held that if a life insurance policy was not assignable, it did not prevent the insuredfrom declaring himself as a trustee for the assignee

Beresford v. Royal Insurance Co. [1938] A.C. 586.

- Held: Assignee cannot claim if it is a crime. Eg suicide. The ban would not affect an assigneefor value before the event apparently giving rise to liability under the policy.

- The action was brought by the executors of the estate of Major Rowlandson, who shothimself. Major Rowlandson had been maintaining five policies on his life. He was insolvent.

Letters and interviews on that day made it clear that he shot himself for the purpose of the

policy moneys being made available for the payment of his debts.

- In this case there was a conflict between two grounds of public policy. The first was the duty of the court to enforce contracts and the other that no man or his

estate is allowed to benefit by his own crime, or, as it may be more aptly put here, no

man is allowed to insure himself against the commission of a crime.

- In the court of first instance Swift J, held that sanctity of contract is of paramountimportance. Swift J came to the conclusion that the rules of public policy did not prevent the

plaintiff from recovering, and entered judgment for the plaintiff.

- The Court of Appeal held that it was contrary to public policy for the plaintiff to be entitledto enforce the contract, and entered judgment for the defendants. It is the over-riding dutyand inherent power of the court to refuse its aid to enforce a promise where the plaintiff has

to set up his own crime or the estate of a deceased seeks to benefit from a crime of the

deceased.

- Lord Atkinstated in his judgement that a man is not to be allowed to have recourse to acourt of justice to claim a benefit from his crime, whether under a contract or under a gift.

Deliberate suicide has always been regarded in English Law as a crime. For these reasons Lord Atkin found that the contract in these circumstances was

unenforceable as there is no right of action from your own wrong thus upholding the

judgement of the Court of Appeal.

- Lord Thankerton and Lord Russell of Killowenagreed with the judgement of Lord Atkin.


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- Lord Macmillanagreed as to enforce payment in favour of the assureds representativewould be to give him a benefit, and no criminal is allowed to benefit in anyway by his crime.

Fire Insurance PoliciesCannot be assigned

- No one can claim under a fire insurance policy if property is sold. Cannot assign it, evenbefore the sale. See earlier.

- When a vendor agrees to sell land, who bears the risks to the property? Equitable title vs legal title Is either sufficient for insurable interest?

- What happens if the vendor does not carry out the agreement?- Can get subrogation?

Collingridge v. Royal Exchange (1877) 3 Q.B.D. 173.

- Mellor J.: Before a vendor conveyed insured property to a purchaser, the vendor remainedthe legal ownerand could maintain an action on the fire insurance policy.

- Plaintiff insured his premises under a fire insurance policy. Insured premises were later acquired by the Metropolitan Board of Works for street

improvements.

After the Board accepted the plaintiff's title, but before the conveyance, thepremiseswere destroyed by fire.

- Insurers: Insured did not have sufficient interestin the premises to maintain an action on thepolicy.

Rayner v. Preston (1881) 19 Ch.D. 1.

- English Court of Appeal: A fire insurance policy did not constitute an interest in landandnothing in the policy passed to a purchaser upon the sale of the land.

- Plaintiffs contracted to buy a house together with certain workshops. Vendors insured the premises under a fire insurance policy but the contract made no

mention of the policy.

Insured premises were damaged by fire before completion and the vendor's insurerspaid for the loss.

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Purchasers: They were entitled to thepayment received by the vendor from his insurers.

Castellian v. Preston (1883) 11 Q.B.D. 380.

- English Court of Appeal: A fire insurer who paid a vendor was entitled to any paymentreceived from the purchaser.

- Owners of certain buildings entered into a contract to sell the premises.- Before completion, fire damaged part of the buildings.- Loss was paid for by the vendors fire insurers.- After completion, the insurers sought to recover thepurchasers paymentfrom the insured.- Insurers: Under their right of subrogation they were entitled to every payment received by

the vendorfrom the purchaser by way of compensation for his loss.


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- ASK: Might the insurer effectively thus run no risk at all? Purchaser has an empty plot of land and must pay full purchase price! PCC says something is wrong. Somebody still suffers loss. Who should really be indemnified? The purchaser. But the law doesnt allow him to have

an interest!. So Parliament stepped in for CLPA. See s 3(13)

S. 3(13), Conveyancing and Law of Property Act, Cap. 61 (1994).

- On a sale of property a stipulation shall be impliedthat thepurchasershall be entitled tothe benefit of any insurance against fire which may be then subsisting thereon in favour of

the vendor.

- ASK: Would an insurer be able to exercise his right of subrogation against a purchaser in thelight of section 3(13)?

Contracts (Rights of Third Parties) Act, Cap. 53B (2002)

Motor insurance policyThe answer is no. Cannot assign

- What if the vehicle is sold? Policy must lapse! The cases however are muddled.

- PCC says that as a matter of practice, insurer might give you pro-rated return of premiumupon sale as a matter of goodwill.

- What additional benefits given under a motor insurance? Do these include allowing aninsured to use another vehicle, or allowing someone else to drive the car?

All these lapse on sale

Ss. 50, 51 Marine Insurance Act (Cap. 387)

Contracts (Rights of Third Parties) Act, Cap. 53B (2002)

Peters v. General Accident Corporation [1938] 2 All E.R. 267.

- English Court of Appeal: A motor insurance policy was highly personal and could not beassigned to a purchaser.

A van owner sold the van for 10. Purchaser made an immediatepayment of 5. Thebalance was to be paid at the purchaser's convenience.

Vendor handed vans registration book and insurance policyto the purchaser. Van was involved in an accident while being driven by the purchaser.A third party was

injured.

- Third Party: The policy was assigned to the purchaserwhen the vendor handed over thepolicy.

- Effectively, no policy in operation at the time of the accident.Smith v. Ralph [1963] 2 Lloyd's Rep. 439.

- Lord Parker C.J.: A vendors motor insurance policy lapsed the moment the insured vehiclewas soldand the policy ceased to operate.


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- A Mr. Davies sold his car to the respondent. Davies handed to the buyer his insurance policywhich covered Davies and anyperson driving the car with the insured's permission.

- Respondent was charged with using the car without insurance coverage against third partyrisks.

- Respondent: He drove the car with the policyholders permission.Dodson v. Peter H Dodson Insurance Services [2001] 1 W.L.R. 1012

- English Court of Appeal: If an insurer expressly granted continued coverage to a policyholderwhen he changed his car, thepolicy remained in force even after the insured car was sold.

- Claimant was insured from Sept. 1992 to Sept. 1993. InApril 1993, claimant sold the insured car. Claimant consulted insurance brokers and was advised that thepolicy continued even

after the sale of the car.

Policy: (b) the company shall not be liable ... in respect of any replacement or additionalvehicleunless particulars of that vehicle are notified to the company.

In May, 1993, claimant was involved in an accident driving his mothers carbut insurersdisclaimed liability.

- Claimant sued the brokers for providing negligent advice.- Court actually said not negligent. It was possible for the policy to continue on.

Documents

Insurance Law-Assignment