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Law Pertaining to Assignment of Policies
There are few types of contracts which are so frequently assigned as insurance policies, and any discussion of the subject must distinguish clearly the underlying difference between the assignment of life policies and the assignment of policies in fire and most other lines of property insurance. The fire-insurance policy, being strictly a personal contract, i.e. insuring the particular owner of the property rather than the property itself, can be assigned only with the consent of the company, and the standard fire policy now in general use provides that "the entire policy shall be null and void if without the consent of the company there be an assignment of the policy before a loss takes place." In case, therefore, of the transfer of insured property, the company may refuse its consent to the transfer of the policy to the new owner, and if such transfer of the policy has been undertaken without the company's knowledge or consent, it will be relieved of all further liability. A life-insurance policy, however, being in the nature of a chose in action, has been held by the courts to be freely assignable for a valuable consideration in the absence of (1) restrictive provisions in the policy, or (2) attempts at concealment of fraud or mere speculative insurance. 1 To hold otherwise might often diminish the value of a Life policy to its owner as a means of securing credit or other benefits. Unlike a fire policy, the life-insurance contract in most instances provides for payment upon death, an event which is certain to occur sooner or later. For this reason the courts have held the life policy to resemble an ordinary chose in action, and have generally inclined to the view that sufficient reasons against its assignability cannot be given so long as there is no infringement of the vested rights of the beneficiary. But, as already stated, if the assignment is based upon an immoral or illegal consideration, the courts will refuse to uphold it; and cases are on record where even executors or administrators of the insured have been permitted to oppose the legality of an assignment on such grounds. After death has occurred, it may be added, the interest in the policy is held to be purely a chose in action subject to assignment by the beneficiary without regard to the "notice of assignment" or any other provisions of the policy. Footnote 1. "It is desirable that the insured should have the opportunity of making free commercial use of his life insurance as available property, for it may often be convenient to secure money, by loan or otherwise, upon it. Unlike the case of a fire policy, as before shown, a life policy was considered assignable at common law. And, by the better opinion, a policy of life insurance may be assigned or made payable to one who has no insurable interest, if the transaction is not a mere cover for a wager. The demands of business quite outweigh the remote possibility that some unscrupulous assignee may succumb to the temptation of murdering or shortening the life of the insured for the sake of hastening payment of the insurance money. Moreover, there would seem to be room for the operation of any such sinister designs regardless of whether the assignee has an insurable interest. A creditor, for example, may be quite as strongly tempted, as the donee of a gift, to realize a prompt payment of the insurance upon the life of the assignor." RICHARDS, GEORGE, Treatise on the Law of Insurance, 527-528. Sections in Chapter 31. |
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