Dear Friends,
As you are aware that a contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the insured, in the manner and to the extent thereby agreed, against transit losses, that is to say losses incidental to transit.
A contract of marine insurance may by its express terms or by usage of trade be extended so as to protect the insured against losses on inland waters or any land risk which may be incidental to any sea voyage.
In simple words the marine insurance includes;
A. CARGO INSURANCE
- which provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air.
Thus cargo insurance concerns the following :
(i) export and import shipments by ocean-going vessels of all types,
(ii) coastal shipments by steamers, sailing vessels, mechanized boats, etc.,
(iii) shipments by inland vessels or country craft, and
(iv) Consignments by rail, road, or air and articles sent by post.
B. HULL INSURANCE
- which is concerned with the insurance of ships (hull, machinery, etc.).
INSURABLE INTEREST
For effecting marine insurance like any other insurance, the assured must have an insurable interest. If there is no such interest, the policy would be a wagering contract and thus it will be void. Any person does have an insurable interest who is interested in a marine journey or who can get affected due to the losses and damages caused in the marine journey or adventure. The interest must subsist either at the time of effecting the insurance or at the time of loss. Any interest which is defeasible or contingent or partial can be insured. A lender under a bottomry bond or respondentia bond has insurable interest as well as master's and seamen's wages, advance freight are insurable, a mortgagee has also insurable interest.
The term " Transfer" or " Assignment" of policies of insurance are governed by the provisions of the Transfer of Property Act,1882 as amended from time to time. Please note that provisions of Section 38 of the Insurance Act,1938 only deals with transfer or assignment of Life Insurance Polices and the provisions of TP Act,1882 deal with other types of insurance policies.
"Actionable Claim"
Section 3 of TP Act,1882 defines as - a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.
The claim under a policy was regarded as property and is treated as an actionable claim under TP Act,1882 and the rules relating a transfer of actionable claim were held to apply to assignment of policies till specific statute laid down some specific rules for such assignments.
Section 6(e) of the Transfer of Property Act,1882 lays down that a mere right to sue cannot be transferred
From above we find that an actionable claim means a claim to a debt. In its primary sense a debt is a liquidated money obligation and it is an essential feature of an action for debt that it should be for a liquidated debt or certain sum of money. The right to recover an ascertained and definite debt is not a mere right to sue and is not transferable. It is an actionable claim.
It means if a certain sum of money is due from any person, that sum is recoverable on assignment, and it is not mere right to sue to offend against the provisions of Section 6( e) of TP act,1882. As you know that in case of an actionable claim, there is a surety that there is some amount,which can be recovered and same as in an Insurance Policy. The Sum Insured is the amount,which will be recoverable at the time of loss or after assignment of insurance policy by the assignee. A policy of insurance is a present contract in the hand of an insured of which he has present right to the benefit although the fruits are to be enjoyed in future.
A policy on a man's life expressed to be payable to his executors or administrators is a reversionary interest certain to fall in on the assured's death or attainment of the stipulated age. A policy of insurance is a choose in action. A policy of life insurance represents money which is due and owned to the assured at his death and in the part of his estate. He has unlettered discretion to sell or charge it, to bequeath it or even to give it away.
"ASSIGNMENT"
It means- Transfer of interest from one to another is called assignment. In insurance also when rights and obligation under the contract are transferred from one to another, the same is called assignment of the policy. There can be another assignment in insurance which is assignment of benefits under the policies. Assignment of policy and assignment of benefits are quite distinct. Whereas in the former all the rights and obligations are transferred, in the latter only benefits (i.e. money due under the policy etc) are transferred. In insurance the assignment means assignment of rights under the contract. An assignee for all purposes becomes the owner of the policy and enjoys all rights thereunder. However, by assignment no change is made in the subject matter insured by the policy and it remains unaltered."
ASSIGNMENT OF A CONTRACT OF INSURANCE AND ASSIGNMENT OF THE SUBJECT MATTER OF INSURANCE
Assignment for the purpose of law of insurance may either be;
- The assignment of the subject matter of insurance ;or
- The assignment of the policy.
Please note that
The question of the assignment of the subject matter of insurance in case of life and personal accident insurances does not arise, for the subject -matter in such cases is from its very nature unassignable.
The assignment of the subject-matter in the case of fire insurance is dealt as follows; " As regards the assignment of the fire policies itself, it is transfer of the contract of insurance with its all rights and liabilities to the transferee and, therefore,it is substitution of a new insured to all intents and purposes other than the original insured."
THE SUBJECT MATTER OF INSURANCE
Anything in respect of which there is a risk of loss from maritime perils may be the subject of marine insurance. It will be recalled that there is a distinction between the subject matter of insurance and the subject matter of the contract of insurance, that every lawful marine adventure may be the subject of a contract of marine insurance, and that a contract of marine insurance may be extended to cover risks other than maritime perils in a narrow sense. However, even though a marine insurance contract may include risks arising inland, the contract must be substantially one relating to a marine adventure. Therefore, the subject matter of the insurance must be capable of exposure to maritime perils.
WHETHER FIRE AND ACCIDENT POLICIES ARE ASSIGNABLE?
It is clear from above discussion that a policy of life insurance is pure benefit policies and carry a definite sum or amount as Sum Assured will be payable at the time of accident or happening of assured perils. So in legal sense a Life Insurance Policy is an actionable claim or chose in action and hence assignable under provisions of TP Act,1882.
Since Fire Insurance Policies and other general insurance policies are pure indemnity policies. There is no amount is fixed that will be payable to the insured. Sum Insurance is the maximum amount to be payable in these policies but same will vary to the extent of loss suffered by the insured. In case of contract of indemnity, the amount payable is not certain or calculable it depends upon the loss suffered by the insured, and it becomes payable only if and when the loss occurs. Therefore we conclude that a policy of fire, property accident insurances are in nature of right to sue for damages and the fact that they as such are not actionable claims is also apparent from the amendment of Section 6(4) of the TP Act,1882 to the effect that a mere right to sue cannot be transferred[Abu Mohammad Vs. SC chunder (1909) 36 Cal 345].
In these policies it may not certain that loss may take place, and also the extent of damages are also not certain. For an actionable claim it must be perfected and absolute, and not merely a sum of money which may or not become payable at future time.
It was held that policies of insurance against loss or damages by fire are not in their nature assignable nor can the interest in them be transferred from one person to another without the express consent of the insurance company. Suppose an insurance policy promises to indemnify "A" against loss by fire. He can assign his right of action against the insurance company to "B", so that if "A" suffers loss "B" may recover in respect of it, but "B" cannot without the consent of insurance company's consent,convert promise to indemnify "A" to a promise to indemnify "B", because that would not be an assignment but an attempted novation.
PLEASE NOTE THAT
Property and liability insurances are personal contracts, and do not run with the property if it is sold or otherwise disposed of or with a transfer of liabilities of the insured. Therefore, both at common law and equity, as assignment of a policy of insurance can only be valid of the insurer consents to this course, whereby, in truth a new contract of insurance is effected between the assignee and the insurer, and that between the assignor (the original insured) and the insurer lapses."
RESTRICTIONS ON ASSIGNABILITY IMPOSED BY THE COMPANY
f parties to a contract of insurance agree to impose restrictions to the assignability of the policy or to make it assignable only with the consent of the company, effect must be given to such restrictions. But such provision does not apply to the case of the person on whom the policy has devolved by the operation of law, or in the case of person who is under obligation to insure. If insurance policy is not assignable they assignee has no right to sue or call the insurance company in case of loss or damage due to insured peril. In this case the right person is the insured /assured to claim loss /damage under insurance policy.
PLEASE NOTE THAT
Life policies are now construed not as a contract of indemnity but to pay a certain sum in a certain vent depending on the duration of human life. If at the time the contract of insurance is made the person affecting insurance has an insurable interest in the life of the person assured the policy is a valid, notwithstanding the fact that the person effecting the insurance ceased to have an interest in the life assured at the time when policy become due. It follows from this that the assignment of a life policy would be valid and would pass to the assignee the rights to the insurance money, even though the assignor's interest in the life had ceased to have an interest in the life assured at the time when the policy became due.
It follows from above that the assignment of a life policy would be valid and would pass to the assignee the rights to the insurance money, even through the assignor's in the life had ceased before the date of the assignment. It means an assignment to person without interest is not invalid assignment.
It is obvious that the contract of insurance may be assigned in one of two ways.
- In the first place, the policy may be assigned without the assignment of the property insured; or,
- secondly, the policy may be assigned together with the assignment of the property insured. The distinction is important, and must be kept in mind.
Where the assignment is of the policy only, there is no difficulty in reconciling this with the nature of a personal contract. All that is assigned in this case is the right to receive the insurance money, in case the interest of the person originally insured suffers loss from the perils insured against. The assignment is like the assignment of any other chose in action. The assignee is merely the person designated to receive the insurance, and he acquires only the rights of the assignor, and is subject to all the defences which the insurers have or may have against the person originally insured.
No element of the personal contract is violated, for it is of no consequence to the insurers who receives the insurance money, so long as they are free from the claims of the person originally insured.
But where the property insured is sold, and the policy is assigned, an entirely different question is raised. In this case, the person originally insured has parted with his entire interest in the subject-matter of the contract. He can suffer no loss, for he had no interest in the property at the time of the loss. The insurers cannot indemnify him, for he has no interest which can be the subject of indemnity. That interest is in the assignee, a stranger to the contract, who is neither a party nor a privy to the original contract, and it is he who suffers the loss. If, then, the contract can be assigned, seemingly the whole conception of a personal contract will be done away with.
ASSIGNMENT OF MARINE INSURANCE POLICY
The terms and conditions of Marine Insurance Policies have governed provisions of the Marine Insurance act,1963.
"(1) A marine policy is assignable unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss.
(2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.
(3) A marine policy may be assigned by endorsement thereon or in other customary manner.
SECTION 17 OF MARINE INSURANCE ACT,1963 provides that
Assignment of interest
Where the assured assigns or otherwise parts with his interest in the subject-matter insured, he does not thereby transfer to the assignee his rights under the contract of insurance, unless there be an express or implied agreement with the assignee to that effect.
But the provisions of this section do not affect the transmission of interest by operation of law.
ACCORDING TO SECTION 25 OF THE MI ACT,1963
Provides that a Marine Insurance Plicy must specify ;
(1) the name of the assured, ore of some person who affects the insurance on his behalf;
(2) the subject-matter insured and the risk insured against.
(3) the voyage, or period of time, both, as the case may be, covered by the insurance;
(4) the sum or sums insured;
(5) the name or names of the insurer or insurers.
Contract must be embodied in policy
According to Section 24 of the marine insurance act 1963, A contract of marine insurance shall not be admitted in evidence unless it is embodied in a Marine policy in accordance with this act (Marine Insurance Act 1963). The policy may be executed and issued either at the time when the contract is concluded or afterwards.
SECTION 52 provides that
When and how policy is assignable.
(1) A marine policy may be transferred by assignment unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss.
(2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the suit had been brought in the name of the person by or on behalf of whom the policy was effected.
(3) A marine policy may be assigned by endorsement thereon or in other customary manner.
SECTION 53 OF MI ACT, 1963
Assured who has no interest cannot assign. Where the assured has parted with or lost his interest in the subject-matter insured, and has not, before or at the time of so doing expressly or impliedly agreed to assign the policy, any subsequent assignment of the policy is inoperative.
Provided that nothing in this section affects the assignment of a policy after loss.
- SECTION 52: Provides as to when and how the marine policy may be transferred. It says that a Marine Policy may be transferred by assignment unless it contains express terms, which prohibits any assignment of the policy. It also provides that such assignment can be made before or after the loss has occasioned.
- SECTION 52(2): Provides that once assignment is made then the assignee is entitle to sue in his name whereas the insure/defendant is also entitled to raise all such defences against the assignee,which are available to him against the origiional insured i.e. the assigner.
- SECTION 17: Provides that where the assured assigns or otherwise parts with his interest in the subject matter insured, he (insured) does not thereby transfer to the assignee his rights under the contract of insurance unless there is an express or implied agreement with the assignee of that effect. This section does not affect the transmission of interest by operation of law.
Please Note That
Section 17 even after making an assignment by the insured of their contract of insurance policy, the rights of insured under the contract of insurance policy are not assigned in favour of assignee by the deed of assignment but they are continued to remain with the insured.
Please Note That
A marine insurance policy is assignable either before or after the loss, unless it contains terms expressly prohibiting assignment. A policy on goods is generally freely assignable. Merchandise like tea, jute and wheat etc., change hands before they reach their destination and policies on them must be freely transferable. Both policies on ship or on freight are subject to restrictions on assignment.
An assignment by the insured of his interest in the subject-matter insured does not transfer his rights in the policy of insurance thereon to the assignee, unless there is an express or implied agreement to that effect. But a transmission of interest in the subject matter insured by operation of law- such as by death or insolvency- will operate as a transfer of the policy also.
An assured who has assigned or lost his interest in the insured property cannot subsequently assign the policy of insurance thereon. Unless before or at the time of assigning the property, he has expressly or impliedly agreed to assign the policy. However, he can always assign the policy after loss. The marine policy may be assigned by endorsements on the policy itself or in any other customary manner. On the assignment of the beneficial interest in the policy, the assignee is entitled to sue thereon in his name.
CONCLUSION
From above discussion it is clear that in case of marine insurance,an Insurable interest must be present only at the time of claiming and policy is easily assignable.It may be assigned to any, who has insurable interest or going to acquire at later date. Cargo insurance assignment does not even require consent of insurer, which is necessary in hull insurance.Transfer of subject matter does not automatically transfer insurance policy also. Person who lost or parted with insurable interest cannot transfer the policy subsequently. We hereby conclude that a Marine Insurance Policy is freely assignable unless expressly prohibited through some terms and conditions in the insurance policy or insured and the insurance company has agreed to prohibit any assignment of insurance policy. There is no inherent difference between the contract of marine insurance and the contract of fire insurance. Both are contracts of indemnity; both are personal contracts with the insured, and both are mercantile contracts ordered and controlled by the custom of merchants. Yet the courts seem to have ruled from the earliest times that, in the case of fire insurance, no assignment of the policy and property will be valid without the consent of the insurer thereto, while in marine insurance no such consent is necessary.
DISCLAIMER: The above article is only for information and knowledge of readers. In case of necessity do consult with insurance professional for more clarity and understanding on subject matter.
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