Fides Media Living the Faith
By Amaka Ezeno, MCLArb
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 collects the proceeds of the insurance policy.
In simpler terms, assignment is the sale or transfer of a subject matter of insurance to another person. The question to be answered is whether the insured must give notice to the insurer before such sale, transfer, or assignment.
An Insurance Policy is 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. Thus, in Peters v General Accident Fire and Life Assurance Corp Ltd (1938) 2 All ER 267, the vendor of a van handed over his insurance policy issued by the defendant insurers to the purchaser.
When he negligently drove his 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 insurers.
In the same vein, in Rayner v Preston (1881) 18 Ch 1, 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.
Therefore, no assignment of a policy 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 – see Section 61(1) of the Insurance Act 2003. Priority of claims is regulated by the date on which the notice is received by the insurer- see Section 61(2) of the Insurance Act 2003
ACKNOWLEDGEMENT OF NOTICE
The insurer is expected, on receipt of the notice of assignment, to deliver an acknowledgement of the receipt of the notice to the insured in writing either personally or through a person duly authorized by the insurer.
TYPES OF ASSIGNMENT
There are two forms of assignment – legal and equitable assignment. Section 60 of the Insurance Act 2003 provides that a person who —
(a) is entitled by assignment or other derivative title to a policy of insurance
(b) has, at the time when action is brought on the policy, the right in equity to receive and to give an effectual discharge to the insurer liable under such policy for money thereby assured or secured, shall be entitled to sue in the name of such person to recover such money, but the assignee shall not have a better title than the insured.
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 assignee 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 assignor or his personal representative to sue for the debt due or money accruing to the assured in an insurance policy.
An Insurance Transaction is essentially a contract between the insurer and the insured which is executed when the insurer signs the insurance policy and the insured pays the agreed premium when due. To ensure the sustainability of claims under the insurance policy, it is expedient that the insurer be notified of any subsequent transaction involving the insurance policy.