ASSIGNMENT OF INSURANCE POLICIES

By Amaka Ezeno, MCLArb,

Assignment is the transfer of one’s rights and obligations under a contract to a third party who is not a party to the contract. An Insurance Policy is a chose in action and freely assignable. Choses in action refer to intangible objects that cannot be possessed but serve as a right or access to things of value e.g. bills of exchange, insurance policies, patents and cheque.

An Assignment of a Policy of Insurance is the transfer of the policy by the insured known as the assignor to a third party who was not initially a party to the contract of insurance known as the assignee. The assignment is to enable the third party or assignee collect the proceeds of the insurance policy

An Insurance Policy is however regarded as personal transaction between  the insurer and insured and a unilateral assignment of the subject matter of the policy is unsustainable except with the consent of the insurers with regard to non-life and non-marine insurance contracts.

Assignment in insurance can come in three different forms:

1. Assignment of the subject matter of insurance
2. Assignment of the benefits of Insurance Policy,
3. Assignment of Insurance policy.

SUBJECT MATTER OF INSURANCE

In situations where a policyholder alienates the subject matter of an insurance policy, the policy lapses as the assignment of the subject matter of an insurance policy cannot operate to assign the insurance policy. In Macaura v Norther Assurance Company Ltd, the insured transferred his interest in the insured timbers to a limited liability company.

When the timber was consumed by fire, he claimed on the policy and the court held that he had ceased to have insurable interest in the timber. In Rayner v Preston, an insured building was destroyed by fire after it was purchased by the plaintiff.

It was held that the plaintiff was not entitled to the benefit accruing from the insurance policy since it was a personal contract between the former owner of the building and the insurers.

ASSIGNMENT OF BENEFITS

Assignment of the benefits of an Insurance Policy means the transfer of right to receive the proceeds accruing from the policy. This often comes into operation where the insured borrows money and secures the loan with insured property.

In such a case, the mortgagee is the beneficiary though the mortgagor is the insured. Thus, in Bentworth Finance Limited v Royal Exchange Assurance, the applicants were named as beneficiaries under the insurance contract that the hirer (under a hire purchase agreement) entered into with the respondent insurer.

An endorsement on the policy clearly indicated that the applicants were the owners of the insured vehicle, which was the subject matter of the hire purchase agreement. Upon the occurrence of the peril insured against, the applicant brought the action for payment on the policy.

The action was resisted by the respondent insurer and the court held that applicants had a right of action on the policy, just like the hirer, by virtue of the fact that they were named as having interest in the subject matter through the endorsement on the policy. However, for this arrangement to subsist, prior notice of the assignment of the benefits must be served on the insurer.

The assignment of Life Insurance Policy is executed by mere endorsement on the policy or a separate instrument. However, it must indicate:

1. the name and address of the assignor,
2. the consideration upon which the assignment is founded, and
3. the name of the assignee.
4. it must also be dated and signed by the assignor.

ASSIGNMENT OF THE POLICY

Assignment of the policy requires consent of the insurer due to the issue of Privity of Contract. Contracts of insurance are personal contracts and cannot be assigned without the consent of the insurer. In Peters v General Accident Fire and Life Assurance Corp Ltd , the vendor of a van handed over his insurance policy issued by the defendant insurers to the purchaser of the van.

When he negligently drove the van and injured the claimant, it was held that the insurers were not liable for the judgment sum awarded against the purchaser as the vendor could not assign his Motor Policy to the  purchaser without the consent of the insurer.

NOTICE OF ASSIGNMENT

No assignment of a policy of Life Insurance can confer on the assignee or  his personal representative any right to sue for the amount of the policy or the insured money unless a written notice of  the date and purport of the assignment is given to the insurer liable under the policy at his principal address of business. Priority of claims is regulated by the date on which the notice is received by the insurer. The assignment could be endorsed on the policy or indicated on a separate document

ACKNOWLEDGMENT OF NOTICE

The insurer is expected to on receipt of the notice of assignment, deliver an acknowledgment of the receipt of the notice to the insured in writing either personally or through a person duly authorized by the insurer

EFFECT OF ASSIGNMENT

An assignment of an insurance policy places the assignee or third party in the position of the assignor (insured) and entitles him to  the benefits accruing to the assignor under the policy. He cannot acquire more rights than the assignor. To be able to enforce the rights conferred on the assignee, the insurance policy has to be stamped. In International Bank For West Africa v Crusader Insurance Co., it was held that an unstamped policy confers no right on the assignee or his personal representative to sue for the debt due or money accruing to the assured in an insurance policy.