Assignment of the Policy

•         A policy of insurance, being a chose in action, is prima facie freely assignable.

•         Any assignment of the policy does not transfer to the assignee rights other than those arising under the policy itself

•         Thus, if the policy is voidable due to the negligence of the assignor’s broker, the assignment of the policy does not also assign any right against the broker.

•         Conditions for valid assignment:

1.    The consent of the insurer must be obtained

2.    To avoid problems of insurable interest, the assignment of the policy & its underlying subject matter must be contemporaneous

3.    The assignment must be in proper form

Consent of the Insurer

•         The willingness of equity to permit assignment of choses in action has always been confined to cases ‘where it can make no difference to the person on whom the obligation lies to which of two parties he shall discharge it’

•         It is clearly of the utmost importance to an insurer to know exactly who the insured is to be eg material facts about his own character

•         Consequently, irrespective of the terms of the policy itself, an insurance policy is not assignable other than with the consent of the insurer.

•         Consent takes effect as a novation.

•         There is thus a new contract, possibly on new terms & at a different premium rate.

Contemporaneous assignment of policy & subject matter

•         The need stems from the rules of insurable interest.

•         2 situations need to be distinguished

1)   The subject matter of the policy is assigned to the 3^rd party before the policy itself.

2)    The policy is assigned to the third party before the subject matter of the policy.