Insurance Law-Assignment

15. Assignment Can you assign an existing policy to a third party? -

Most policies are non-assignable. Policy based on personal characteristics

Questions 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. -

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Charles J.: Once a vendor conveyed insured property to a purchaser, the policy lapsed as the vendor could no longer claim an indemnity under the policy. Certain farm buildings in Kent were transferred by the Dean and Chapter of the Cathedral Church of Canterbury to the Ecclesiastical Commissioners. The transfer was effected on August 17 by publishing the scheme in the London Gazette. Buildings were insured under a fire insurance policy taken out by the Dean and Chapter. Two days after the transfer, the farm was destroyed by fire. An action was brought by both the transferor and the transferee against the insurers.  ASK: Why couldn’t the purchaser sue?

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

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Court: When goods were put on board a buyer’s lighter, property passed to the buyer. Vendor’s 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 sank off the plaintiffs' wharf. In June, 1872, Vagliano Brothers handed the policy to plaintiffs; and on October 17, the policy 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. -

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Lord Hardwicke: Under an indemnity policy, an insured must have an interest in the insured property at the time of the loss. A tenant took a lease on a house for under 7 years. Premises were insured for 7 years, and at the 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.

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 -

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English Court of Appeal: An assignment of a life policy by way of gift was revocable if the assignor did not take all the necessary steps to perfect the gift. An imperfect gift was revoked upon the assured’s death. A Mr. Williams handed his life assurance policy to his housekeeper intending to make a gift of the policy to her. Indorsement on the policy: “I authorise Ada Maud Ball, my housekeeper, to draw this insurance 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 policy or by a in the words or to the effect set separate instrument out in the Schedule, such endorsement or separate instrument being duly stamped.

S. 1, Policies of Assurance Act -

Any person or corporation now being or hereafter becoming entitled, by assignment or other 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.

S. 3, Policies of Assurance Act -

No assignment made after the passing of this Act of a policy of life assurance shall confer on the 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 company liable 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 policies for £500 each. - Clarke delivered one policy to the plaintiffs and as to the second policy, he claimed that he had left it at home. - Plaintiffs informed the insurers that the two policies were deposited with them as security for the loan. - Clarke had earlier deposited the second policy with a Mr. Tranter as security for a loan of £100. - When Clarke died, the plaintiffs claimed that they were entitled to priority over the second policy. 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 manner

Assignment of choses in action Regulated 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 assignment by writing under the hand of the assignor, not purporting to be by way of charge only, of any 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 to pass 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 Policies They may be assigned -

What is the authority? Must complete formalities?  If not equitable title. Which means someone else takes precedence over you if they take first, possibly.  See Re Williams

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 it’s 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 insured from declaring himself as a trustee for the assignee

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

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Held: Assignee cannot claim if it is a crime. Eg suicide. The ban would not affect an assignee for 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 shot himself. 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 paramount importance. 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 entitled to enforce the contract, and entered judgment for the defendants. It is the over-riding duty and 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 Atkin stated in his judgement that “a man is not to be allowed to have recourse to a court 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 Killowen agreed with the judgement of Lord Atkin.

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Lord Macmillan agreed as to enforce payment in favour of the assured’s representative would be to give him a benefit, and no criminal is allowed to benefit in anyway by his crime.

Fire Insurance Policies Cannot be assigned -

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No one can claim under a fire insurance policy if property is sold. Cannot assign it, even before 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. -

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Mellor J.: Before a vendor conveyed insured property to a purchaser, the vendor remained the legal owner and 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, the premises were destroyed by fire. Insurers: Insured did not have sufficient interest in the premises to maintain an action on the policy. 

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

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English Court of Appeal: A fire insurance policy did not constitute an interest in land and nothing 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 insurers paid for the loss. Purchasers: They were entitled to the payment 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 payment received 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 vendor’s fire insurers. After completion, the insurers sought to recover the purchaser’s payment from the insured. Insurers: Under their right of subrogation they were entitled to every payment received by the vendor from 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 doesn’t 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). -

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On a sale of property a stipulation shall be implied that the purchaser shall be entitled to the 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 the light of section 3(13)?

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

Motor insurance policy The 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 premium upon sale as a matter of goodwill. What additional benefits given under a motor insurance? Do these include allowing an insured 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. -

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English Court of Appeal: A motor insurance policy was highly personal and could not be assigned to a purchaser.  A van owner sold the van for £10. Purchaser made an immediate payment of £5. The balance was to be paid at the purchaser's convenience.  Vendor handed van’s registration book and insurance policy to 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 purchaser when the vendor handed over the policy.  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 vendor’s motor insurance policy lapsed the moment the insured vehicle was sold and 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 policy which covered Davies and any person driving the car with the insured's permission. Respondent was charged with using the car without insurance coverage against third party risks. Respondent: He drove the car with the policyholder’s permission. 

Dodson v. Peter H Dodson Insurance Services [2001] 1 W.L.R. 1012 -

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English Court of Appeal: If an insurer expressly granted continued coverage to a policyholder when he changed his car, the policy remained in force even after the insured car was sold. Claimant was insured from Sept. 1992 to Sept. 1993.  In April 1993, claimant sold the insured car.  Claimant consulted insurance brokers and was advised that the policy continued even after the sale of the car.  Policy: “(b) the company shall not be liable ... in respect of any replacement or additional vehicle unless particulars of that vehicle are notified to the company.”  In May, 1993, claimant was involved in an accident driving his mother’s car but insurers disclaimed liability. Claimant sued the brokers for providing negligent advice. Court actually said not negligent. It was possible for the policy to continue on.