Clasification and Assignment of the subject matter of the insurance policy
What amounts to an Assignment In Insurance
Generally, an assignment in law is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. For example, if Party A contracts with Party B to sell Party A's car to Party B for $10, Party A can later assign the benefits of the contract - i.e., the right to be paid $10 - to Party C. In this scenario, Party A is the obligee / assignor, Party B is an obligor, and Party C is the assignee. Assignments are generally be permitted unless there is an express prohibition against the assignment of rights in the contract. Where assignment is thus permitted, the assignor need not consult the other party to the contract. An assignment cannot have any effect on the duties of the other party to the contract, nor can it reduce the possibility of the other party receiving full performance of the same quality. For assignment to be effective, it must occur in the present.
No specific language is required to make such an assignment, but the assignor must make some clear statement of intent to assign clearly identified contractual rights to the assignee. A promise to assign in the future has no legal effect. A cause of action for breach of the contract on the part of the obligor lies with the assignee, which will hold the exclusive right to commence a cause of action for any failure to perform or defective performance. Because the assignee substitutes the assignor, the obligor can raise any defense to the contract that the obligor could have raised against the assignor
When looking at Assignment in Insurance, the study is in three contexts; to wit; the effect of assignment by the insured of the subject matter of the insurance policy, the assignment of the benefit of a contract of insurance and the assignment of the contract of insurance itself.
Generally, an assignment in law is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. For example, if Party A contracts with Party B to sell Party A's car to Party B for $10, Party A can later assign the benefits of the contract - i.e., the right to be paid $10 - to Party C. In this scenario, Party A is the obligee / assignor, Party B is an obligor, and Party C is the assignee. Assignments are generally be permitted unless there is an express prohibition against the assignment of rights in the contract. Where assignment is thus permitted, the assignor need not consult the other party to the contract. An assignment cannot have any effect on the duties of the other party to the contract, nor can it reduce the possibility of the other party receiving full performance of the same quality. For assignment to be effective, it must occur in the present.
No specific language is required to make such an assignment, but the assignor must make some clear statement of intent to assign clearly identified contractual rights to the assignee. A promise to assign in the future has no legal effect. A cause of action for breach of the contract on the part of the obligor lies with the assignee, which will hold the exclusive right to commence a cause of action for any failure to perform or defective performance. Because the assignee substitutes the assignor, the obligor can raise any defense to the contract that the obligor could have raised against the assignor
When looking at Assignment in Insurance, the study is in three contexts; to wit; the effect of assignment by the insured of the subject matter of the insurance policy, the assignment of the benefit of a contract of insurance and the assignment of the contract of insurance itself.
Classification of Insurance
(a) Insurance of the person.
This classification is not equivalent to ‘personal insurance’),that’s to say. Human beings being the subject matter of the insurance. For example. life insurance, health insurance and personal accident insurances, among others.
(b) Insurance of property.
This involves covering tangible objects against loss or damage For example fire, motor damage, marine cargo, among others
(c) Insurance of liability.
This involves covering legal liability for death, injury or Property damage to others for example. employees compensation, public liability, among others.
(d) Insurance of pecuniary interests:
This classification relates to any financial interest to be insured not covered by Insurance of the person, Insurance of property, Insurance of Liability as mentioned in (a) - (c) above, as well as business interruption, credit and rent insurances.
Assignment of the subject matter
This mainly concerns insurance of property when that property is sold or disposed of by the insured. Generally, the assignment of a subject matter of an insurance policy cannot operate to assign the insurance. Once the contract for the sale of property or land is made, the purchaser obtains an equitable interest in the property although the vendor retains the legal estate. At this stage they both clearly have an insurable interest. However, upon the completion of the purchase and therefore the passing of title, the legal estate vest in the purchaser and at this point, the vendor ceases to have an insurable interest. If the property is therefore damaged at this point, the vendor may not recover anything for this reason. The purchaser on the other hand is not the insured under the policy and therefore not party to the agreement between the insurer and the insured/vendor. However, it should be noted that if the policy allows assignment of the rights of the insured, then such shall be the case.
In Rayner vs. Preston (1881) 18 ch d 1,
The plaintiffs purchased from the defendants a message and workshops. Between the date of the contract and the time fixed for completion the buildings purchased were injured by fire. The vendors had, before the contract, insured the buildings against fire, but there was not in the contract any mention of this fact, or any mention of the policy. The plaintiffs brought an action to establish their right to a sum received by the vendors from the insurance office, or to have it applied in or towards reinstating the buildings injured.
The court below decided against their claim, and from this the plaintiffs appealed. It was contended by the appellants that they were entitled to the moneys. The court of appeal denied the plaintiffs claim holding that the insurance contract was merely and that the parties were simply parties to a contract of vendor and purchaser and not trustee and beneficiary and therefore, the contract would not pass anything in respect of the moneys.
The court emphasized that, the contract of insurance is a mere personal contract for the payment of money on the happening of certain conditions. It is not a contract which runs with the land. If so, upon the completion of the purchase, there ought to be a decree that the policy be handed over. But that is not the law. It is a mere personal contract, and, unless the personal contract is assigned, there can be no suit of action maintained upon it, except between the original parties to it.
Assignment of the benefit and Assignment of the policy
It must not be thought that the academic classification is only of use in studying for examinations. Thinking about insurance according to the function it performs, ie. (person, property, liability, pecuniary interest etc.) is a useful check-list when trying to help a client on deciding what insurances to take or have.
Tags : Insurance Law