ASSIGNMENT - INSURANCE

ASSIGNMENT

Different forms of assignment

1. Assignment of the subject matter of the policy

 -eg.the sale of a property.

2.  Assignment of the policy itself.

-eg fire insurance policy

3. Assignment of the proceeds of the policy itself.

- The right to recover under it

A)  Assignment of the subject matter of the policy

•         Where the insured voluntarily disposes of his entire interest in the subject matter insured under a policy,

•         whether by sale or gift,

•         it is clear from the common law indemnity principle that the insured will be unable to present a claim under the policy on the happening of an insured peril,

•          as he cannot suffer any loss & has no insurable interest

•         If the subject matter is:

       i.            merely mortgaged to a third party,

    ii.            if there is a contract of sale under which the insured has retained the risk in or ownership of the subject matter

  iii.            If the insured has assigned the subject matter absolutely but has retained possession by way of security of payment

  iv.            Then, the insured has a continuing insurable interest & the validity of the policy is at that stage unaffected.

    v.            Moreover, if the policy was stated to cover the interests of the buyer, it remains in force as regards that person even though the insured may have lost the right to sue under it.

  vi.            The assignment of the subject matter of the policy does not automatically carry with it an implied assignment of the policy itself.

vii.            This is made clear by S.15 MIA 1906, which is applicable to all classes of insurance

viii.            This does not mean to say that an agreement between the assignor & assignee to assign the insurance policy is necessarily valid.

  ix.            This will depend upon the form of assignment, the need for contemporaneous assignment of the subject matter and policy, the consent of the insurer to a change of insured

    x.            Where a company goes into liquidation its assets, accompanied by any insurance policy on them, are transferred to the liquidator.

  xi.            Where an individual dies or becomes insolvent his assets & insurance vest in his personal representatives or trustee in bankruptcy.

xii.            Consequently, any loss prior to the distribution of the assets may be recovered by the relevant statutory assignee.

xiii.            Distribution of the assets to the persons entitled to receive them is itself regarded as assignment by way of operation of law

xiv.            So that a policy assigned by the statutory assignee contemporaneously with the insured subject matter will remain in force irrespective of the insurer’s consent