assignment of insurance policy document

Assignment of insurance policies and claims | Practical Law

Assignment of insurance policies and claims

Practical law uk practice note w-031-6021  (approx. 19 pages).

• sample policy

FREE 11+ Assignment of Insurance Policy Samples in PDF | MS Word

People want security amidst uncertainty. To grasp it, they use financial planning tools or purchase marine insurance, fire insurance, homeowners insurance, loan insurance, life insurance, funeral insurance, etc. As an insurance company leader, it is your job to provide them this assurance. To do that, you need to provide an assignment of insurance policy once the customer agrees with the  insurance proposal . In this article, we will discuss more of it.

Assignment Of Insurance Policy

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An insurance policy is a type of contract that both you, as an insurer or insurance provider, and the insured or policyholder agree. It contains  terms and conditions  about the insurance claims and benefits, which you need to fulfill accordingly in exchange for an initial payment, which is also known as premium.

An insurance contract should include a beneficiary who will receive the benefits and claims. With an assignment of insurance policy, you can state this information. Meaning, through an assignment, the insured can determine who will receive the benefits and claims of the insurance policy under what terms and conditions. Depending on the type of insurance, the insured can also use it as a collateral assignment. In this case, the insured can use the value of the insurance policy as security for a loan. Meaning, the creditor will get full control of the benefits and other claims included in the policy in case the insured, who is the borrower, is unable to pay the loan, especially if the individual dies.

Did you know that in 2018, the United States was the country in terms of the required amount to pay for  life insurance  premiums? It is! Jennifer Rudden of Statista reported on February 24, 2020, that the state has a total of $593.4 billion life direct premiums written, which Japan tailed with a $334.24 billion premiums written. By broadening and improving the scope of the policy insurance you offer, you may attract more clients to invest in your company. Start by obtaining or enhancing your product’s assignment form. Check out the following examples for you to get an idea of how you will design your assignment of the insurance policy.

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Guide your clients in accomplishing an assignment of insurance policy by following the steps below.

There are different types of assignments that the insured can choose from, which can be a conditional or absolute assignment.

Conditional Assignment

A conditional assignment is the most common type of insurance policy assignment. You can see it mostly in life insurance contracts. An insured can use it to ensure that his relatives or any specified individuals can get the benefits and proceeds of the policy in case something happens to the individual, such as death or disability. However, aside from death or permanent disabilities, you can agree to other conditions. In this case, the policyholder, which is the insured, can restore his rights once he fulfills these conditions.

Absolute Assignment

In this assignment, the insured can specifically assign the individual where he wants to transfer the rights, benefits, and liabilities of the policy without terms and conditions, giving the assignee full control over the insurance policy.

The next thing the insured has to accomplish is to submit a  notice of assignment  and  deed of assignment , which your company will provide. For documentation and legal purposes, make sure that he or she fills out the necessary forms with a signature and reason for the assignment.

For the same reason for securing the notice of assignment, you need to collect the client’s proof of income, verified copies of photo ID, address proof, and PAN card.

Depending on the policy your company adheres to, you can collect fees as you have agreed in the contract. You can also include  stamps  if your company has one.

You have the right to decide whether or not the assignment request is appropriate, especially if it conflicts with the contract that you and your client have both agreed. Nevertheless, inform the person of your decision to set proper expectations. You can also offer an alternative option if available, in case you decide to reject the request. In this way, you can negate the unfavorable news that you are going to share with the client.

There are many types of life insurance, but most of them fall under the following major types of life insurance.

It is a type of life insurance where the insured needs to pay for it until his or her death.

It is a type of life insurance that has a specific timeframe.

Aside from the insuring agreement, you can include exclusions in the insurance contract to create a more defined contract coverage. This section will clarify the situations that the policy does not cover.

It is a section of an insurance contract that describes the perils and risks that the insurance policy covers.

To offer clients a more valuable insurance policy, you can include an assignment of insurance policy. By making your products more valuable, you will attract more potential clients. You can also develop  product management  to create more improved insurance products.

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ASSIGNMENT OF INSURANCE POLICY

BE IT KNOWN, for value received, the undersigned ____________________________ of ____________________________ hereby irrevocably transfers and assigns to ____________________________ all legal and beneficial right, title and interest in and to the within policy of insurance standing in my name and known as Policy No. ____________________________ issued by the ____________________________ Insurance Company. I also assign all cash values, proceeds and benefits thereto arising, subject to the conditions of said policy and the requirement of the issuing underwriter: The undersigned warrants that it has full authority to transfer said policy, and shall execute all further documents as may be required, by the underwriter. This assignment shall be binding upon and inure to the benefit of the parties, their successors, assigns and personal representatives. Signed this ________ day of _________________ , 20 ____ . In the presence of: ____________________________ Witness                                                        ____________________________ Assignor's Signature

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Assignment of Benefits for Contractors: Pros & Cons of Accepting an AOB

22 articles

Insurance , Restoration , Slow Payment

When a property owner files an insurance claim to cover a restoration or roofing project, the owner typically deals directly with the insurance company. They may not have the funds available to pay the contractor out of pocket, so they’re counting on that insurance check to cover the construction costs.

But insurance companies often drag their feet, and payments can take even longer than normal. Contractors often wish they could simply deal with the insurance company directly through an assignment of benefits. In some circumstances, an AOB can be an effective tool that helps contractors collect payment faster — but is it worth it?

In this article, we’ll explain what an assignment of benefits is, and how the process works. More importantly, we’ll look at the pros and cons for restoration and roofing contractors to help you decide if an AOB is worth it . 

What is an assignment of benefits? 

An assignment of benefits , or AOB, is an agreement to transfer insurance claim rights to a third party. It gives the assignee authority to file and negotiate a claim directly with the insurance company, without involvement from the property owner. 

An AOB also allows the insurer to pay the contractor directly instead of funneling funds through the customer. AOBs take the homeowner out of the claims equation.

Here’s an example: A property owner’s roof is damaged in a hurricane. The owner contacts a restoration company to repair the damage, and signs an AOB to transfer their insurance rights to the contractor. The contractor, now the assignee, negotiates the claim directly with the insurance company. The insurer will pay the claim by issuing a check for the repairs directly to the restoration contractor. 

Setting up an AOB

A property owner and contractor can set up an assignment of benefits in two steps: 

• The owner and the contractor sign an AOB agreement
• The contractor sends the AOB to the insurance company

Keep in mind that many states have their own laws about what the agreement can or should include .

For example, Florida’s assignment of benefits law contains relatively strict requirements when it comes to an assignment of benefits: 

• The AOB agreements need to be in writing. The agreement must contain a bolded disclosure notifying the customer that they are relinquishing certain rights under the homeowners policy. You can’t charge administrative fees or penalties if a homeowner decides to cancel the AOB. 
• The AOB must include an itemized, per-unit breakdown of the work you plan to do. The services can only involve how you plan to make repairs or restore the home’s damage or protect the property from any further harm. A copy must be provided to the insurance company. 
• A homeowner can rescind an AOB agreement within 14 days of signing, or within 30 days if no work has begun and no start date was listed for the work. If a start date is listed, the 30-day rule still applies if substantial progress has not been made on the job. 

Before signing an AOB agreement, make sure you understand the property owner’s insurance policy, and whether the project is likely to be covered.

Learn more: Navigating an insurance claim on a restoration project

Pros & cons for contractors

It’s smart to do a cost-benefit analysis on the practice of accepting AOBs. Listing pros and cons can help you make a logical assessment before deciding either way. 

Pro: Hiring a public adjuster

An insurance carrier’s claims adjuster will inspect property damage and arrive at a dollar figure calculated to cover the cost of repairs. Often, you might feel this adjuster may have overlooked some details that should factor into the estimate. 

If you encounter pushback from the insurer under these circumstances, a licensed, public adjuster may be warranted. These appraisers work for the homeowner, whose best interests you now represent as a result of the AOB. A public adjuster could help win the battle to complete the repairs properly. 

Pro: More control over payment

You may sink a considerable amount of time into preparing an estimate for a customer. You may even get green-lighted to order materials and get started. Once the ball starts rolling, you wouldn’t want a customer to back out on the deal. 

Klark Brown , Co-founder of The Alliance of Independent Restorers, concedes this might be one of the very situations in which an AOB construction agreement might help a contractor. “An AOB helps make sure the homeowner doesn’t take the insurance money and run,” says Brown.  

Pro: Build a better relationship with the homeowner

A homeowner suffers a substantial loss and it’s easy to understand why push and pull with an insurance company might be the last thing they want to undertake. They may desire to have another party act on their behalf. 

As an AOB recipient, the claims ball is now in your court. By taking some of the weight off a customer’s shoulders during a difficult period, it could help build good faith and further the relationship you strive to build with that client. 

Learn more : 8 Ways for Contractors to Build Trust With a Homeowner

Con: It confuses payment responsibilities

Even if you accept an AOB, the property owner still generally bears responsibility for making payment. If the insurance company is dragging their feet, a restoration contractor can still likely file a mechanics lien on the property .

A homeowner may think that by signing away their right to an insurance claim, they are also signing away their responsibility to pay for the restoration work. This typically isn’t true, and this expectation could set you up for a more contentious dispute down the line if there is a problem with the insurance claim. 

Con: Tighter margins

Insurance companies will want repairs made at the lowest cost possible. Just like you, carriers run a business and need to cut costs while boosting revenue. 

While some restoration contractors work directly with insurers and could get a steady stream of work from them, Brown emphasizes that you may be sacrificing your own margins. “Expect to accept work for less money than you’d charge independently,” he adds. 

The takeaway here suggests that any contractor accepting an AOB could subject themselves to the same bare-boned profit margins. 

Con: More administrative work

Among others, creating additional administrative busywork is another reason Brown recommends that you steer clear of accepting AOBs. You’re committing additional resources while agreeing to work for less money. 

“Administrative costs are a burden,” Brown states. Insurers may reduce and/or delay payments to help their own bottom lines. “Insurers will play the float with reserves and claims funds,” he added. So, AOBs can be detrimental to your business if you’re spending more while chasing payments. 

Con: Increase in average collection period

Every contractor should use some financial metrics to help gauge the health of the business . The average collection period for receivables measures the average time it takes you to get paid on your open accounts. 

Insurance companies aren’t known for paying claims quickly. If you do restoration work without accepting an AOB, you can often take action with the homeowner to get paid faster. When you’re depending on an insurance company to make your payment, rather than the owner, collection times will likely increase.

The literal and figurative bottom line is: If accepting assignment of benefits agreements increases the time it takes to get paid and costs you more in operational expense, these are both situations you want to avoid. 

Learn more: How to calculate your collection effectiveness 

AOBs and mechanics liens

A mechanics lien is hands down a contractor’s most effective tool to ensure they get paid for their work. Many types of restoration services are protected under lien laws in most states. But what happens to lien rights when a contractor accepts an assignment of benefits? 

An AOB generally won’t affect a contractor’s ability to file a mechanics lien on the property if they don’t receive payment. The homeowner is typically still responsible to pay for the improvements. This is especially true if the contract involves work that wasn’t covered by the insurance policy. 

However, make sure you know the laws in the state where your project is located. For example, Florida’s assignment of benefits law, perhaps the most restrictive in the country, appears to prohibit an AOB assignee from filing a lien. 

Florida AOB agreements are required to include language that waives the contractor’s rights to collect payment from the owner. The required statement takes it even further, stating that neither the contractor or any of their subs can file a mechanics lien on the owner’s property. 

On his website , Florida’s CFO says: “The third-party assignee and its subcontractors may not collect, or attempt to collect money from you, maintain any action of law against you, file a lien against your property or report you to a credit reporting agency.”

That sounds like a contractor assignee can’t file a lien if they aren’t paid . But, according to construction lawyer Alex Benarroche , it’s not so cut-and-dry.

“Florida’s AOB law has yet to be tested in court, and it’s possible that the no-lien provision would be invalid,” says Benarroche. “This is because Florida also prohibits no-lien clauses in a contract. It is not legal for a contractor to waive their right to file a lien via an agreement prior to performance.” 

Learn more about no-lien clauses and their enforceability state-by-state

Remember that every state treats AOBs differently, and conflicting laws can create additional risk. It’s important to consult with a construction lawyer in the project’s state before accepting an assignment of benefits. 

Best practices for contractors 

At the end of the day, there are advantages and disadvantages to accepting an assignment of benefits. While it’s possible in some circumstances that an AOB could help a contractor get paid faster, there are lots of other payment tools that are more effective and require less administrative costs. An AOB should never be the first option on the table . 

If you do decide to become an assignee to the property owner’s claim benefits, make sure you do your homework beforehand and adopt some best practices to effectively manage the assignment of benefits process. You’ll need to keep on top of the administrative details involved in drafting AOBs and schedule work in a timely manner to stay in compliance with the conditions of the agreement. 

Make sure you understand all the nuances of how insurance works when there’s a claim . You need to understand the owner’s policy and what it covers. Home insurance policy forms are basically standardized for easy comparisons in each state, so what you see with one company is what you get with all carriers. 

Since you’re now the point of contact for the insurance company, expect more phone calls and emails from both clients and the insurer . You’ll need to have a strategy to efficiently handle ramped-up communications since the frequency will increase. Keep homeowners and claims reps in the loop so you can build customer relationships and hopefully get paid faster by the insurer for your work.

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• Life Insurance
• Definitions

What Is a Collateral Assignment of Life Insurance?

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

A collateral assignment of life insurance is a conditional assignment appointing a lender as an assignee of a policy. Essentially, the lender has a claim to some or all of the death benefit until the loan is repaid. The death benefit is used as collateral for a loan.

The advantage to using a collateral assignee over naming the lender as a beneficiary is that you can specify that the lender is only entitled to a certain amount, namely the amount of the outstanding loan. That would allow your beneficiaries still be entitled to any remaining death benefit.

Lenders commonly require that life insurance serve as collateral for a business loan to guarantee repayment if the borrower dies or defaults. They may even require you to get a life insurance policy to be approved for a business loan.

Key Takeaways

• The borrower of a business loan using life insurance as collateral must be the policy owner, who may or may not be the insured.
• The collateral assignment helps you avoid naming a lender as a beneficiary.
• The collateral assignment may be against all or part of the policy's value.
• If any amount of the death benefit remains after the lender is paid, it is distributed to beneficiaries.
• Once the loan is fully repaid, the life insurance policy is no longer used as collateral.

How a Collateral Assignment of Life Insurance Works

Collateral assignments make sure the lender gets paid only what they are due. The borrower must be the owner of the policy, but they do not have to be the insured person. And the policy must remain current for the life of the loan, with the policy owner continuing to pay all premiums . You can use either term or whole life insurance policy as collateral, but the death benefit must meet the lender's terms.

A permanent life insurance policy with a cash value allows the lender access to the cash value to use as loan payment if the borrower defaults. Many lenders don't accept term life insurance policies as collateral because they do not accumulate cash value.

Alternately, the policy owner's access to the cash value is restricted to protect the collateral. If the loan is repaid before the borrower's death, the assignment is removed, and the lender is no longer the beneficiary of the death benefit.

Insurance companies must be notified of the collateral assignment of a policy. However, other than their obligation to meet the terms of the contract, they are not involved in the agreement.

Example of Collateral Assignment of Life Insurance

For example, say you have a business plan for a floral shop and need a $50,000 loan to get started. When you apply for the loan, the bank says you must have collateral in the form of a life insurance policy to back it up. You have a whole life insurance policy with a cash value of $65,000 and a death benefit of $300,000, which the bank accepts as collateral.

So, you then designate the bank as the policy's assignee until you repay the $50,000 loan. That way, the bank can ensure it will be repaid the funds it lent you, even if you died. In this case, because the cash value and death benefit is more than what you owe the lender, your beneficiaries would still inherit money.

Alternatives to Collateral Assignment of Life Insurance

Using a collateral assignment to secure a business loan can help you access the funds you need to start or grow your business. However, you would be at risk of losing your life insurance policy if you defaulted on the loan, meaning your beneficiaries may not receive the money you'd planned for them to inherit.

Consult with a financial advisor to discuss whether a collateral assignment or one of these alternatives may be most appropriate for your financial situation.

Life insurance loan (policy loan) : If you already have a life insurance policy with a cash value, you can likely borrow against it. Policy loans are not taxed and have less stringent requirements such as no credit or income checks. However, this option would not work if you do not already have a permanent life insurance policy because the cash value component takes time to build.

Surrendering your policy : You can also surrender your policy to access any cash value you've built up. However, your beneficiaries would no longer receive a death benefit.

Other loan types : Finally, you can apply for other loans, such as a personal loan, that do not require life insurance as collateral. You could use loans that rely on other types of collateral, such as a home equity loan that uses your home equity.

What Are the Benefits of Collateral Assignment of Life Insurance?

A collateral assignment of a life insurance policy may be required if you need a business loan. Lenders typically require life insurance as collateral for business loans because they guarantee repayment if the borrower dies. A policy with cash value can guarantee repayment if the borrower defaults.

What Kind of Life Insurance Can Be Used for Collateral?

You can typically use any type of life insurance policy as collateral for a business loan, depending on the lender's requirements. A permanent life insurance policy with a cash value allows the lender a source of funds to use if the borrower defaults. Some lenders may not accept term life insurance policies, which have no cash value. The lender will typically require the death benefit be a certain amount, depending on your loan size.

Is Collateral Assignment of Life Insurance Irrevocable?

A collateral assignment of life insurance is irrevocable. So, the policyholder may not use the cash value of a life insurance policy dedicated toward collateral for a loan until that loan has been repaid.

What is the Difference Between an Assignment and a Collateral Assignment?

With an absolute assignment , the entire ownership of the policy would be transferred to the assignee, or the lender. Then, the lender would be entitled to the full death benefit. With a collateral assignment, the lender is only entitled to the balance of the outstanding loan.

The Bottom Line

If you are applying for life insurance to secure your own business loan, remember you do not need to make the lender the beneficiary. Instead you can use a collateral assignment. Consult a financial advisor or insurance broker who can walk you through the process and explain its pros and cons as they apply to your situation.

Progressive. " Collateral Assignment of Life Insurance ."

Fidelity Life. " What Is a Collateral Assignment of a Life Insurance Policy? "

Kansas Legislative Research Department. " Collateral Assignment of Life Insurance Proceeds ."

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Assignment of Life Insurance

WARNING! This form permanently transfers ownership of your FEGLI insurance to another individual, trustee, or corporation (however, premiums continue to be withheld from your salary/annuity). An assignment is irrevocable, and cannot be changed later. DO NOT USE THIS FORM if you only wish to designate a beneficiary to receive your life insurance. Instead, use the available designation of beneficiary form .

For more information about assignments and designations of beneficiary, see the FEGLI Booklet on Assignments , and Designation of Beneficiary and Order of Precedence .

FEGLI enrollees use this form to assign ownership of their life insurance coverage to another person, firm, or trust; and assignees use the form to reassign the coverage.

Electronic Copies:

RI 76-10 

Paper Copies:

Request a paper copy of this form from your servicing Human Resources Office.

Annuitants:

• Call toll free 1-888-767-6738 (202-606-0500 in the DC Area), or
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Assignment under Insurance Policies

By J Mandakini, NUALS

Editor’s Note: This paper attempts to explore the concept of assignment under Indian law especially Contract Act, Insurance Act and Transfer of Property Act. It seeks to appreciate why the assignment is made use of for securities of a facility sanctioned by ICICI Bank. Also, it explains how ICICI Bank faces certain problems in executing the same. 

INTRODUCTION

For any facility sanctioned by a lender, collateral is always deposited to secure the same. Such mere deposition will not suffice, the borrower has to explicitly permit the lender to recover from the borrower, such securities in case of his default.

This is done by the concept of assignment, dealt with adequately in Indian law. Assignment of obligations is always a tricky matter and needs to be dealt with carefully. The Bank should not fall short of any legally permitted lengths to ensure the same. This is why ambiguity in its security documents have to be rectified. 

This paper attempts to explore the concept of assignment in contract law. It seeks to appreciate why the assignment is made use of for securities of a facility sanctioned by ICICI Bank. The next section will deal with how ICICI Bank faces certain problems in executing the same. The following sections will talk about possible risks involved, as well as defenses and solutions to the same.

WHAT IS ASSIGNMENT?

Assignment refers to the transfer of certain or all (depending on the agreement) rights to another party. The party which transfers its rights is called an assignor, and the party to whom such rights are transferred is called an assignee. Assignment only takes place after the original contract has been made. As a general rule, assignment of rights and benefits under a contract may be done freely, but the assignment of liabilities and obligations may not be done without the consent of the original contracting party.

The liability on a contract cannot be transferred so as to discharge the person or estate of the original contractor unless the creditor agrees to accept the liability of another person instead of the first. [i]

Illustration

P agrees to sell his car to Q for Rs. 100. P assigns the right to receive the Rs. 100 to S. This may be done without the consent of Q. This is because Q is receiving his car, and it does not particularly matter to him, to whom the Rs. 100 is being handed as long as he is being absolved of his liability under the contract. However, notice may still be required to be given. Without such notice, Q would pay P, in spite of the fact that such right has been assigned to S. S would be a sufferer in such case.

In this case, that condition is being fulfilled since P has assigned his right to S. However, P may not assign S to be the seller. P cannot just transfer his duties under the contract to another. This is because Q has no guarantee as to the condition of S’s car. P entered into the contract with Q on the basis of the merits of P’s car, or any other personal qualifications of P. Such assignment may be done with the consent of all three parties – P, Q, S, and by doing this, P is absolved of his liabilities under the contract.

 1.1. Effect of Assignment

Immediately on the execution of an assignment of an insurance policy, the assignor forgoes all his rights, title and interest in the policy to the assignee. The premium or loan interest notices etc. in such cases will be sent to the assignee. [ii] However, the existence of obligations must not be assumed, when it comes to the assignment. It must be accompanied by evidence of the same. The party asserting such a personal obligation must prove the existence of an express assumption by clear and unequivocal proof. [iii]

 Assignment of a contract to a third party destroys the privity of contract between the initial contracting parties. New privity is created between the assignee and the original contracting party. In the illustration mentioned above, the original contracting parties were P and Q. After the assignment, the new contracting parties are Q and S.

 1.2. Revocation of Assignment

Assignment, once validly executed, can neither be revoked nor canceled at the option of the assignor. To do so, the insurance policy will have to be reassigned to the original assignor (the insured).

 1.3. Exceptions to Assignment

There are some instances where the contract cannot be assigned to another.

• Express provisions in the contract as to its non-assignability – Some contracts may include a specific clause prohibiting assignment. If that is so, then such a contract cannot be assigned. Assignability is the rule and the contrary is an exception. [iv]

Pensions, PFs, military benefits etc. Illustration

 1.4. enforcing a contract of assignment.

From the day on which notice is given to the insurer, the assignee becomes the beneficiary of the policy even though the assignment is not registered immediately. It does not wait until the giving of notice of the transfer to the insurer. [vi] However, no claims may lie against the insurer until and unless notice of such assignment is delivered to the insurer.

If notice of assignment is not provided to the obligor, he is discharged if he pays to the assignor. Assignee would have to recover from the assignor. However, if the obligor pays the assignor in spite of the notice provided to him, he would still be liable to the assignee.

The following two illustrations make the point amply clear:

Illustrations

1. Seller A assigns its right to payment from buyer X to bank B. Neither A nor B gives notice to X. When payment is due, X pays A. This payment is fully valid and X is discharged. It will be up to B to recover it from A

2. Seller A assigns to bank B its right to payment from buyer X. B immediately gives notice of the assignment to X. When payment is due, X still pays A. X is not discharged and B is entitled to oblige X to pay a second time.

An assignee doesn’t stand in better shoes than those of his assignor. Thus, if there is any breach of contract by the obligor to the assignee, the latter can recover from the former only the same amount as restricted by counter claims, set offs or liens of the assignor to the obligor.

The acknowledgment of notice of assignment is conclusive proof of, and evidence enough to entertain a suit against an assignor and the insurer respectively who haven’t honoured the contract of assignment.

1.5. Assignment under various laws in India

There is no separate law in India which deals with the concept of assignment. Instead, several laws have codified it under different laws. Some of them have been discussed as follows:

1.5.1. Under the Indian Contract Act

There is no express provision for the assignment of contracts under the Indian Contract Act. Section 37 of the Act provides for the duty of parties of a contract to honour such contract (unless the need for the same has been done away with). This is how the Act attempts to introduce the concept of assignment into Indian commercial law. It lays down a general responsibility on the “representatives” of any parties to a contract that may have expired before the completion of the contract. (Illustrations to Section 37 in the Act).

An exception to this may be found from the contract, e.g. contracts of a personal nature. Representatives of a deceased party to a contract cannot claim privity to that contract while refusing to honour such contract. Under this Section, “representatives” would also include within its ambit, transferees and assignees. [vii]

Section 41 of the Indian Contract Act applies to cases where a contract is performed by a third party and not the original parties to the contract. It applies to cases of assignment. [viii] A promisee accepting performance of the promise from a third person cannot afterwards enforce it against the promisor. [ix] He cannot attain double satisfaction of its claim, i.e., from the promisor as well as the third party which performed the contract. An essential condition for the invocation of this Section is that there must be actual performance of the contract and not of a substituted promise.

  1.5.2. Under the Insurance Act

The creation of assignment of life insurance policies is provided for, under Section 38 of the Insurance Act, 1938.

• When the insurer receives the endorsement or notice, the fact of assignment shall be recorded with all details (date of receipt of notice – also used to prioritise simultaneous claims, the name of assignee etc). Upon request, and for a fee of an amount not exceeding Re. 1, the insurer shall grant a written acknowledgment of the receipt of such assignment, thereby conclusively proving the fact of his receipt of the notice or endorsement. Now, the insurer shall recognize only the assignee as the legally valid party entitled to the insurance policy.

 1.5.3. Under the Transfer of Property Act

Indian law as to assignment of life policies before the Insurance Act, 1938 was governed by Sections 130, 131, 132 and 135 of the Transfer of Property Act 1882 under Chapter VIII of the Act – Of Transfers of Actionable Claims. Section 130 of the Transfer of Property Act states that nothing contained in that Section is to affect Section 38 of the Insurance Act.

 I) Section 130 of the Transfer of Property Act

An actionable claim may be transferred only by fulfilling the following steps:

• Signed by a transferor (or his authorized agent)

The transfer will be complete and effectual as soon as such an instrument is executed. No particular form or language has been prescribed for the transfer. It does not depend on giving notice to the debtor.

The proviso in the section protects a debtor (or other person), who, without knowledge of the transfer pays his creditor instead of the assignee. As long as such payment was without knowledge of the transfer, such payment will be a valid discharge against the transferee. When the transfer of any actionable claim is validly complete, all rights and remedies of transferor would vest now in the transferee. Existence of an instrument in writing is a sine qua non of a valid transfer of an actionable claim. [x]

 II) Section 131 of the Transfer Of Property Act

This Section requires the notice of transfer of actionable claim, as sent to the debtor, to be signed by the transferor (or by his authorized agent), and if he refuses to sign it, a signature by the transferee (or by his authorized agent). Such notice must state both the name and address of the transferee. This Section is intended to protect the transferee, to receive from the debtor. The transfer does not bind a debtor unless the transferor (or transferee, if transferor refuses) sends him an express notice, in accordance with the provisions of this Section.

III) Section 132 of the Transfer Of Property Act

This Section addresses the issue as to who should undertake the obligations under the transfer, i.e., who will discharge the liabilities of the transferor when the transfer has been made complete – would it be the transferor himself or the transferee, to whom the rest of the surviving contract, so to speak, has been transferred.

This Section stipulates, that the transferee himself would fulfill such obligations. However, where an actionable claim is transferred with the stipulation in the contract that transferor himself should discharge the liability, then such a provision in the contract will supersede Ss 130 and 132 of this Act. Where the insured hypothecates his life insurance policies and stipulates that he himself would pay the premiums, the transferee is not bound to pay the premiums. [xi]

FACILITIES SECURED BY INSURANCE POLICIES – HOW ASSIGNMENT COMES INTO THE PICTURE

Many banks require the borrower to take out or deposit an insurance policy as security when they request a personal loan or a business loan from that institution. The policy is used as a way of securing the loan, ensuring that the bank will have the facility repaid in the event of either the borrower’s death or his deviations from the terms of the facility agreement.

Along with the deposit of the insurance policy, the policyholder will also have to assign the benefits of the policy to the financial institution from which he proposes to avail a facility. The mere deposit, without writing, or passing of any document of title to such a claim, does not create any equitable charge. [xii]

ETHICS OF ASSIGNING LIFE INSURANCE POLICY TO LENDERS

The purpose of taking out a life insurance policy on oneself, is that in the event of an untimely death, near and dear ones of the deceased are not left high and dry, and that they would have something to fall back on during such traumatic times. Depositing and assigning the rights under such policy document to another, would mean that there is a high chance that benefits of life insurance would vest in such other, in the event of unfortunate death and the family members are prioritized only second. These are not desirable circumstances where the family would be forced to cope with the death of their loved one coupled with the financial crisis.

 Thus, there is a need to examine the ethics of:

• The bank accepting such assignment

The customer should be cautious before assigning his rights under life insurance policies. By “cautious”, it is only meant that he and his dependents and/or legal heirs should be aware of the repercussions of the act of assigning his life insurance policy. It is conceded that no law prohibits the assignment of life insurance policies.

In fact, Section 38 of the Insurance Act, 1938 , provides for such assignments. Judicial cases have held life insurance policies as property more than a social welfare measure. [xiii] Further, the bank has no personal relationship with any customer and thus has no moral obligation to not accept such assignments of life insurance.

However, the writer is of the opinion that, in dealing with the assignment of life insurance policies, utmost care and caution must be taken by the insured when assigning his life insurance policy to anyone else.

CURRENT STAND OF ICICI REGARDING FACILITIES SECURED BY INSURANCE POLICY, WITH SPECIFIC REFERENCE TO ASSIGNMENT OF OBLIGATIONS

This Section seeks to address and highlight the manner in which ICICI Bank drafts its security documents with regard to the assignment of obligations. The texts placed in quotes in the subsequent paragraphs are verbatim extracts from the security document as mentioned.

Composite Document for Corporate and Realty Funding

 “ 8 .   CHARGING CLAUSE

  The Mortgagor doth hereby:

iii) Assign and transfer unto the Mortgagee all the Bank Accounts and all rights, title, interest, benefits, claims and demands whatsoever of the Mortgagor in, to, under and in respect of the Bank Accounts and all monies including all cash flows and receivables and all proceeds arising from Projects and Other Projects_______________, insurance proceeds, which have been deposited / credited / lying in the Bank Accounts, all records, investments, assets, instruments and securities which represent all amounts in the Bank Accounts, both present and future (the “Account Assets”, which expression shall, as the context may permit or require, mean any or each of such Account Assets) to have and hold the same unto and to the use of the Mortgagee absolutely and subject to the powers and provisions herein contained and subject also to the proviso for redemption hereinafter mentioned;

(v) Assign and transfer unto the Mortgagee all right, title, interest, benefit, claims and demands whatsoever of the Mortgagors, in, to, under and/or in respect of the Project Documents (including insurance policies) including, without limitation, the right to compel performance thereunder, and to substitute, or to be substituted for, the Mortgagor thereunder, and to commence and conduct either in the name of the Mortgagor or in their own names or otherwise any proceedings against any persons in respect of any breach of, the Project Documents and, including without limitation, rights and benefits to all amounts owing to, or received by, the Mortgagor and all claims thereunder and all other claims of the Mortgagor under or in any proceedings against all or any such persons and together with the right to further assign any of the Project Documents, both present and future, to have and to hold all and singular the aforesaid assets, rights, properties, etc. unto and to the use of the Mortgagee absolutely and subject to the powers and provisions contained herein and subject also to the proviso for redemption hereinafter mentioned.”

 ICICI Bank’s Standard Terms and Conditions Governing Consumer Durable Loans

  “ insurance.

The Borrower further agrees that upon any monies becoming due under the policy, the same shall be paid by the Insurance Company to ICICI Bank without any reference / notice to the Borrower, but not exceeding the principal amount outstanding under the Insurance Policy. The Borrower specifically acknowledges that in all cases of claim, the Insurance Company will be solely liable for settlement of the claim, and he/she will not hold ICICI Bank responsible in any manner whether for compensation, recovery of compensation, processing of claims or for any reason whatsoever.

Reference has been made only to assignment of assets, rights, benefits, interests, properties etc. No specific reference has been made to the assignment of obligations of the assignor under such insurance contract.

THE ISSUE FACED BY ICICI BANK

Where ICICI Bank accepts insurance policy documents of customers as security for a loan, in the light of the fact that the documents are silent about the question of assignment of obligations, are they assigned to ICICI Bank? Where there is hypothecation of a life insurance policy, with a stipulation that the mortgagor (assignor) should pay the premiums, and that the mortgagee (assignee) is not bound to pay the same, Sections 130 and 132 do not apply to such cases. [xiv] With rectification of this issue, ICICI Bank can concretize its hold over the securities with no reservations about its legality.

RISKS INVOLVED

This section of the paper attempts to explore the many risks that ICICI Bank is exposed to, or other factors which worsen the situation, due to the omission of a clause detailing the assignment of obligations by ICICI Bank.

Practices of Other Companies

The practices of other companies could be a risk factor for ICICI Bank in the light of the fact that some of them expressly exclude assignment of obligations in their security documents.

There are some companies whose notice of assignment forms contain an exclusive clause dealing with the assignment of obligations. It states that while rights and benefits accruing out of the insurance policy are to be assigned to the bank, obligations which arise out of such policy documents will not be liable to be performed by the bank. Thus, they explicitly provide for the only assignment of rights and benefits and never the assignment of obligations.

Possible Obligation to Insurance Companies

By not clearing up this issue, ICICI Bank could be held to be obligated to the insurance company from whom the assignor took the policy, for example, with respect to insurance premiums which were required to be paid by the assignor. This is not a desirable scenario for ICICI Bank. In case of default by the assignor in the terms of the contract, the right of ICICI Bank over the security deposited (insurance policy in question) could be fraught in the legal dispute.

Possible litigation

Numerous suits may be instituted against ICICI Bank alleging a violation of the Indian Contract Act. Some examples include allegations of concealment of fact, fraud etc. These could be enough to render the existing contract of assignment voidable or even void.

Contra Proferentem

This doctrine applies in a situation when a provision in the contract can be interpreted in more than one way, thereby creating ambiguities. It attempts to provide a solution to interpreting vague terms by laying down, that a party which drafts and imposes an ambiguous term should not benefit from that ambiguity. Where there is any doubt or ambiguity in the words of an exclusion clause, the words are construed more forcibly against the party putting forth the document, and in favour of the other party. [xv]

The doctrine of contra proferentem attempts to protect the layman from the legally knowledgeable companies which draft standard forms of contracts, in which the former stands on a much weaker footing with regard to bargaining power with the latter. This doctrine has been used in interpreting insurance contracts in India. [xvi]

If litigation ensues as a result of this uncertainty, there are high chances that the Courts will tend to favour the assignor and not the drafter of the documents.

POSSIBLE DEFENSES AGAINST DISPUTES FOR THE SECURITY DOCUMENTS AS THEY ARE NOW

This section of the paper attempts to give defences which the Bank may raise in case of any disputes arising out of silence on the matter of assignability of obligations.

Interpretation of the Security Documents

UNIDROIT principles expressly provide a method for interpretation of contracts. [xvii] The method consists of utilizing the following factors:

This defence relates to the concept of estoppel embodied in Section 115 of the Indian Evidence Act, 1872. According to the Section, when one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representatives, to deny the truth of that thing.

If a man either by words or by conduct has intimated that he consents to an act which has been done and that he will not offer any opposition to it, and he thereby induces others to do that which they otherwise might have abstained from, he cannot question legality of the act he had sanctioned to the prejudice of those who have so given faith to his words or to the fair inference to be drawn from his conduct. [xviii] Subsequent conduct may be relevant to show that the contract exists, or to show variation in the terms of the contract, or waiver, or estoppel. [xix]

Where the meaning of the instrument is ambiguous, a statement subsequently interpreting such instrument is admissible. [xx] In the present case, where the borrower has never raised any claims with regard to non assignability of obligations on him, and has consented to the present conditions and relations with ICICI Bank, he cannot he cannot be allowed to raise any claims with respect to the same.

Internationally, the doctrine of post contractual conduct is invoked for such disputes. It refers to the acts of parties to a contract after the commencement of the contract. It stipulates that where a party has behaved in a particular manner, so as to induce the other party to discharge its obligations, even if there has been a variation from the terms of the contract, the first party cannot cite such variation as a reason for its breach of the contract.

Where the parties to a contract are both under a common mistake as to the meaning or effect of it, and therefore embark on a course of dealing on the footing of that mistake, thereby replacing the original terms of the contract by a conventional basis on which they both conduct their affairs, then the original contract is replaced by the conventional basis. The parties are bound by the conventional basis. Either party can sue or be sued upon it just as if it had been expressly agreed between them. [xxi]

The importance of consensus ad idem has been concretized by various case laws in India. Further, if the stipulations and terms are uncertain and the parties are not ad idem there can be no specific performance, for there was no contract at all. [xxii]

In the present case, the minds of the assignor and assignee can be said to have not met while entering into the assignment. The assignee never had any intention of undertaking any obligations of the assignor. In Hartog v Colin & Shields, [xxiii] the defendants made an offer to the plaintiffs to sell hare skins, offering to a pay a price per pound instead of per piece.

AVOIDING THESE RISKS

To concretize ICICI Bank’s stand on the assignment of obligations in the matter of loans secured by insurance policies, the relevant security documents could be amended to include such a clause.

For instances where loans are secured by life insurance policies, a standard set by the American Banker’s Association (ABA) has been followed by many Indian commercial institutions as well. [xxvi] The ABA is a trade association in the USA representing banks ranging from the smallest community bank to the largest bank holding companies. ABA’s principal activities include lobbying, professional development for member institutions, maintenance of best practices and industry standards, consumer education, and distribution of products and services. [xxvii]

There are several ICICI security documents which have included clauses denying any assignment of obligations to it. An extract of the deed of hypothecation for vehicle loan has been reproduced below:

“ 3. In further pursuance of the Loan Terms and for the consideration aforesaid, the Hypothecator hereby further agrees, confirms, declares and undertakes with the Bank as follows:

(i)(a) The Hypothecator shall at its expenses keep the Assets in good and marketable condition and, if stipulated by the Bank under the Loan Terms, insure such of the Assets which are of insurable nature, in the joint names of the Hypothecator and the Bank against any loss or damage by theft, fire, lightning, earthquake, explosion, riot, strike, civil commotion, storm, tempest, flood, erection risk, war risk and such other risks as may be determined by the Bank and including wherever applicable, all marine, transit and other hazards incidental to the acquisition, transportation and delivery of the relevant Assets to the place of use or installation. The Hypothecator shall deliver to the Bank the relevant policies of insurance and maintain such insurance throughout the continuance of the security of these presents and deliver to the Bank the renewal receipts / endorsements / renewed policies therefore and till such insurance policies / renewal policies / endorsements are delivered to the Bank, the same shall be held by the Hypothecator in trust for the Bank. The Hypothecator shall duly and punctually pay all premia and shall not do or suffer to be done or omit to do or be done any act, which may invalidate or avoid such insurance. In default, the Bank may (but shall not be bound to) keep in good condition and render marketable the relevant Assets and take out / renew such insurance. Any premium paid by the Bank and any costs, charges and expenses incurred by the Bank shall forthwith on receipt of a notice of demand from the Bank be reimbursed by the Hypothecator and/or Borrower to the Bank together with interest thereon at the rate for further interest as specified under the Loan Terms, from the date of payment till reimbursement thereof and until such reimbursement, the same shall be a charge on the Assets…”

The inclusion of such a clause in all security documents of the Bank can avoid the problem of assignability of obligations in insurance policies used as security for any facility sanctioned by it.

An assignment of securities is of utmost importance to any lender to secure the facility, without which the lender will not be entitled to any interest in the securities so deposited.

In this paper, one has seen the need for assignment of securities of a facility. Risks involved in not having a separate clause dealing with non assignability of obligations have been discussed. Certain defences which ICICI Bank may raise in case of the dispute have also been enumerated along with solutions to the same.

Formatted by March 2nd, 2019.

BIBLIOGRAPHY

[i] J.H. Tod v. Lakhmidas , 16 Bom 441, 449

[ii] http://www.licindia.in/policy_conditions.htm#12, last visited 30 th June, 2014

[iii] Headwaters Construction Co. Ltd. v National City Mortgage Co. Ltd., 720 F. Supp. 2d 1182 (D. Idaho 2010)

[iv] Indian Contract Act and Specific Relief Act, Mulla, Vol. I, 13 th Edn., Reprint 2010, p 968

[v] Khardah Co. Ltd. v. Raymond & Co ., AIR 1962 SC 1810: (1963) 3 SCR 183

[vi] Principles of Insurance Law, M.N. Srinivasan, 8 th Edn., 2006, p. 857

[vii] Ram Baran v Ram Mohit , AIR 1967 SC 744: (1967) 1 SCR 293

[viii] Sri Sarada Mills Ltd. v Union of India, AIR 1973 SC 281

[ix] Lala Kapurchand Godha v Mir Nawah Himayatali Khan, [1963] 2 SCR 168

[x] Velayudhan v Pillaiyar, 9 Mad LT 102 (Mad)

[xi] Hindustan Ideal Insurance Co. Ltd. v Satteya, AIR 1961 AP 183

[xii] Mulraj Khatau v Vishwanath, 40 IA 24 – Respondent based his claim on a mere deposit of the policy and not under a written transfer and claimed that a charge had thus been created on the policy.

[xiii] Insure Policy Plus Services (India) Pvt. Ltd. v The Life Insurance Corporation of India, 2007(109)BOMLR559

[xiv] Transfer of Property Act, Sanjiva Row, 7 th Edn., 2011, Vol II, Universal Law Publishing Company, New Delhi

[xv] Ghaziabad Development Authority v Union of India, AIR 2000 SC 2003

[xvi] United India Insurance Co. Ltd. v M/s. Pushpalaya Printers, [2004] 3 SCR 631, General Assurance Society Ltd. v Chandumull Jain & Anr., [1966 (3) SCR 500]

[xvii] UNIDROIT Principles, Art 4.3

[xviii] B.L.Sreedhar & Ors. v K.M. Munireddy & Ors., 2002 (9) SCALE 183

[xix] James Miller & Partners Ltd. v Whitworth Street Estates (Manchester) Ltd., [1970] 1 All ER 796 (HL)

[xx] Godhra Electricity Co. Ltd. v State of Gujarat, AIR 1975 SC 32

[xxi] Amalgamated Investment & Property Co. Ltd. v Texas Commerce International Bank Ltd., [1981] 1 All ER 923

[xxii] Smt. Mayawanti v Smt. Kaushalya Devi, 1990 SCR (2) 350

[xxiii] [1939] 3 All ER 566

[xxiv] Terrell v Alexandria Auto Co., 12 La.App. 625

[xxv] http://www.uncitral.org/pdf/english/CISG25/Pamboukis.pdf, last visited on 30 th June, 2014

[xxvi] https://www.phoenixwm.phl.com/shared/eforms/getdoc.jsp?DocId=525.pdf, last visited on 30 th June, 2014

[xxvii] http://www.aba.com/About/Pages/default.aspx, last visited on 30 th June, 2014

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Assignment in Insurance Policy | Meaning | Explanation | Types

Table of Contents

• 1 What is Assignment in an Insurance Policy?
• 2 Who can make an assignment?
• 3 What happens to the ownership of the policy upon Assignment?
• 4 Can assignment be changed or cancelled?
• 5 What happens if the assignment dies?
• 6 What is the procedure to make an assignment?
• 7 Is it necessary to Inform the insurer about assignment?
• 8 Can a policy be assigned to a minor person?
• 9 Who pays premium when a policy is assigned?
• 10.1 1. Conditional Assignment
• 10.2 2. Absolute Assignment

What is Assignment in an Insurance Policy?

Assignment means a complete transfer of the ownership of the policy to some other person. Usually assignment is done for the purpose of raising a loan from a bank or a financial institution .

Assignment is governed by Section 38 of the Insurance Act 1938 in India. Assignment can also be done in favour of a close relative when the policyholder wishes to give a gift to that relative. Such an assignment is done for “natural love and affection”. An example, a policyholder may assign his policy to his sister who is handicapped.

Who can make an assignment?

A policyholder who has policy on his own life can assign the policy to another person. However, a person to whom a policy has been assigned can reassign the policy to the policyholder or assign it to any other person. A nominee cannot make an assignment of the policy. Similarly, an assignee cannot make a nomination on the policy which is assigned to him.

What happens to the ownership of the policy upon Assignment?

When a policyholder assign a policy, he loses all control on the policy. It is no longer his property. It is now the assignee’s property whether the policyholder is alive or dead, the assignee alone will get the policy money from the insurance company.

If the assignee dies, then his (assignee’s) legal heirs will be entitled to the policy money.

Can assignment be changed or cancelled?

An assignment cannot be changed or cancelled. The assignee can of course, reassign the policy to the policyholder who assigned it to him. He can also assign the policy to any other person because it is now his property. We can think of a bank reassigning the policy to the policyholder when their loan is repaid.

What happens if the assignment dies?

If the assignee dies, the assignment does not get cancelled. The legal heirs of the assignee become entitled to the policy money. Assignment is a legal transfer of all the interests the policyholder has in the policy to the assignee.

What is the procedure to make an assignment?

Assignment can be made only after issue of the policy bond. The policyholder can either write out the wording on the policy bond (endorsement) or write it on a separate paper and get it stamped. (Stamp value is the same, as the stamp required for the policy — Twenty paise per one thousand sum assured). When assignment is made by an endorsement on the policy bond, there is no need for stamp because the policy is already stamped.

Is it necessary to Inform the insurer about assignment?

Yes, it is necessary to give information about assignment to the insurance company. The insurer will register the assignment in its records and from then on recognize the assignee as the owner of the policy. If someone has made more than one assignment, then the date of the notice will decide which assignment has priority. In the case of reassignment also, notice is necessary.

Can a policy be assigned to a minor person?

Assignment can be made in favour of a minor person. But it would be advisable to appoint a guardian to receive the policy money if it becomes due during the minority of the assignee.

Who pays premium when a policy is assigned?

When a policy is assigned normally, the assignee should pay the premium, because the policy is now his property. In practice, however, premium is paid by the assignor (policyholder) himself. When a bank gives a loan and takes the assignment of a policy a security, it will ask the assignor himself to pay the premium and keep it in force. In the case of an assignment as a gift, the assignor would like to pay the premium because he has gifted the policy.

Types of assignment

Assignment may take two forms:

• Conditional Assignment.
• Absolute Assignment.

1. Conditional Assignment

It would be useful where the policyholder desires the benefit of the policy to go to a near relative in the event of his earlier death. It is usually effected for consideration of natural love and affection. It generally provides for the right to revert the policyholder in the event of the assignee predeceasing the policyholder or the policyholder surviving to the date of maturity.

2. Absolute Assignment

This assignment is generally made for valuable consideration. It has the effect of passing the title in the policy absolutely to the assignee and the policyholder in no way retains any interest in the policy. The absolute assignee can deal with the policy in any manner he likes and may assign or transfer his interest to another person.

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Administration of registered student organizations.

The contents of this website and the related student organization pages are currently under review. If you have questions regarding a policy or procedure outlined below, please contact Leadership, Service, and Civic Engagement at [email protected] .

University Administration has authority to manage the policies within this document and to take action based on them, together with other University policies and all applicable law. Registered student organizations must adhere to the policies outlined below. Unless otherwise denoted hereafter, the use of the term “student organization” shall include sports clubs registered by Recreational Services.

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• Monies benefiting student organizations: Student organizations are not able to offer tax-deductibility to individuals and/or businesses when collecting donations, contributions, and/or sponsorships. Accordingly, when student organizations undertake fundraising projects, they need to inform potential contributors that the donor contributions will not be tax deductible.
• Student organizations must provide proof that organization membership voted to approve the contribution/donation to the benefitting agency. Submit meeting minutes to SOBO or Recreational Services that document the approval and complete all appropriate process through Leadership & Engagement. Once the processes are complete, the organization must submit a completed and signed check voucher.
• Receiving Online Payment: Student organizations utilizing online registration through which a financial transaction is occurring that will benefit the student organization must utilize the University approved vendor for online payment.

II. Funding Resources

Registered student organizations are guaranteed an equal opportunity to apply for funds from mandatory Student Activity fees (i.e., for student organizations) or Recreational Services fees (i.e., for sports clubs) or for any other benefit conferred by the Undergraduate Student Government (USG) or Graduate and Professional Student Government (GPSG) or their constituent bodies, without differentiation for reasons that violate the University Policy on Human Rights or inhibit the group’s exercise of First Amendment rights of free expression and association. Nothing in this section shall be construed to create or guarantee any expectation of the receipt of funding or other benefits from USG and/or GPSG and/or Recreational Services by any student organization or to prohibit the individual consideration of the program merits of funding or other proposals submitted by such student organizations.

• Student organizations must follow all University cash-handling policies as established by the Student Organization Business Office, Recreational Services, or UI Accounts Payable and Purchasing Departments. Money received by the student organization may not be converted to private use and must be deposited in the organization’s account.
• In-kind sponsorship: Student organizations may request and receive contributions (e.g., coupons, gift cards, food, venue rental) from businesses to benefit the organization’s activities. Federal financial aid regulations require the University account for all aid, including gift cards provided to students, if the student is a recipient of need-based financial aid. If the recipient of the gift card receives financial aid from the UI Office of Student Financial Aid, this action may impact the amount of financial aid the student receives.
• Monetary sponsorship: Student organizations may request and receive monetary contributions from businesses to benefit the organization’s activities.
• In-kind sponsorship: Student organizations may request and receive contributions (e.g., coupons, gift cards, food, venue rental) from UI colleges/departments/units or other student organizations to benefit the organization’s activities. Federal financial aid regulations require the University account for all aid, including gift cards provided to students, if the student is a recipient of need-based financial aid. If the recipient of the gift card receives financial aid from the UI Office of Student Financial Aid, this action may impact the amount of financial aid the student receives.
• Monetary sponsorship: Student organizations may request and receive monetary contributions from UI colleges/departments/units or student organizations to benefit the organization’s activities.
• Sponsorship of external vendor for profit: University policy permits student organizations to sponsor for profit businesses, the University regulates the time, place, and frequency of these opportunities. An off-campus enterprise whose items or services are being marketed by a student organization may be required to indemnify the University and provide adequate insurance well in advance of the event as a precondition of the approval.
• Raffles: A raffle is a form of gambling and raffle sales will be taxed. Student organizations must complete and sign the gambling license application form and submit to Student Organization Business Office (SOBO) for approval, in addition to completing all processes associated with the event. If approved, a copy of the gambling license must be obtained at the SOBO and displayed at any location where raffle tickets are being sold, and at the time the winner is announced. Student organizations must use a secure cash box (available for rent from the Student Organization Business Office). Gambling other than raffles is prohibited. Additional requirements are included on the gambling license application form and must be followed to receive approval.
• Event/Tournament/Program Admission: Student organizations are allowed to charge admission to events/tournaments/programs. Admission revenues collected are taxable and receipts must be submitted to the Student Organization Business Office or Recreational Services.
• Event/Tournament/Program Registration: Event/Tournament/Program Registration: Student organizations are allowed to charge registration fees to events/tournaments/programs. Registration revenues collected are taxable and receipts must be submitted to the Student Organization Business Office or Recreational Services.
• Merchandise: Student organizations are allowed to sell items for profit outside of their membership. Merchandise sales are taxable and receipts must be submitted to the Student Organization Business Office or Recreational Services.
• Dues: Student organizations are allowed to collect dues or membership fees from members.
• Date/People Auctions
• Events that purposefully destroy property, such as a car smash
• Balloon/Lantern Releases
• Tailgates and events with alcohol at venues that do not have their own liquor license
• Events that purposefully waste food (i.e. food-eating contests and pie-in-the-face events)

III. Programs/Events/Tournaments

Student organizations may participate alone or with others in planning, promoting, financing, executing, and evaluating a program/event/tournament, hereafter referred to as event. An event is considered to be sponsored by a student organization when organization members are notified in a regular or special meeting or by a special announcement or posting, or when the financial responsibility is met by the organization, or when specific plans or arrangements are made to conduct an event. Absence of members at an event does not relieve the organization from responsibility as a sponsor. However, presence of members of a student organization at an event does not automatically qualify that organization as a sponsor unless the organization itself took part in planning, announcing, discussing, financing, or executing the event.

Student organizations sponsoring events must have a balance on hand in its student organization account to cover the costs of the program, including facility rental, Student Organization Business Office charges, speaker’s fee, advertising, and other expenses, or adequate funds must be deposited with the organization by an underwriter, which funds cannot be repaid until all costs and expenses incurred by the organization in presenting the event have been satisfied. No advertising or publicizing of any commercial product or trade name shall be permitted without prior approval.

• Conditions: In determining the reasonableness of the time, place, and manner of the planned event or activity Leadership & Engagement, Recreational Services, IMU Event Services, and Facilities Management, Space Planning & Utilization shall consider whether the proposed activity conflicts with regularly scheduled University activities or other scheduled events in the area. Other reasonable time, place, and manner conditions may be imposed as a precondition of conducting the activity (e.g., an applicant may be asked for information regarding the anticipated number of participants and spectators, the adequacy of arrangements for crowd control, parking, and sanitary facilities).
• No event request shall be denied unless the applicant is apprised of the reasons for the denial. In the case of a denial, an immediate appeal shall be afforded by the vice president or their designee.
• Reservations for space with a rental fee, Hubbard Park, Kautz Plaza/Pentacrest (if spending money), hosting a speaker, blood drives, tournaments, bake sales, rallies, showing or playing copyrighted material (movies), or charging admission/collecting funds, or any other reservation deemed as required by Ce Leadership & Engagement, Recreational Services, or IMU Event Services.
• Student organizations must initiate an event submission form through the University of Iowa student organization platform (Engage). The form is designed to engage key campus partners in the review and support of all student organization events. The submitting student representative is responsible for engaging with the form throughout the process, responding to inquiries and requests for additional information as needed. information as needed. Completed forms, accompanied by any necessary payments, must be submitted before an event will be confirmed. Event submissions should be initiated four weeks before the event date and two (2) weeks before any organizational meetings. Organizations hosting events in a General Assignment Classroom are required to complete and submit an event request through the University of Iowa student organization platform (Engage)
• Charges: Student organizations that are permitted to use available University space and facilities may be charged an amount commensurate with the expense incurred by the University in making the facility available.
• Cash transactions are not permitted in General Assignment Classrooms.
• Food is not permitted in General Assignment Classrooms.
• Policies regarding Pentacrest use (University Operations Manual)
• Policies regarding other outdoor space use (University Operations Manual)
• Waiver & Release Forms: Student organizations may be required to work with the Office of Risk Management, Insurance, & Loss Prevention to assess the need for and develop a waiver and release form for certain types of events (e.g., physical activities, travel).
• Insurance: Student organizations may be required to work with the Office of Risk Management, Insurance, & Loss Prevention to assess the need for and potentially purchase special event insurance for organization-sponsored events (e.g., inflatables, races, competitions).
• Bake Sales: Student organizations are permitted to conduct bakes sales in the IMU, Recreational Services facilities, or academic colleges at specified areas or on Hubbard Park. All regulations set by the Johnson County Department of Public Health and IMU/Recreational Services/academic colleges must be strictly followed. Organizations must complete all required processes including but not limited to submitting an event request through the University of Iowa student organization
• Race Events: Student organizations are permitted to plan and host competitive and non-competitive race events (e.g., fun-runs; timed walk, run, wheel races) to raise awareness and/or funds for charity. Student organizations must meet with and receive approval from the appropriate staff in Leadership & Engagement. Event forms are required to be submitted through the University of Iowa student organization platform for all race events.
• Registration of Programs to which Admission is Charged and/or Donations are Accepted: Student organizations may sponsor entertainment, tournaments, or lecture programs to which a general admission fee is charged provided such programs are registered with Leadership and Engagement or Recreational Services at least two weeks in advance. No contracts or other financial commitments may be made by the sponsoring student organization until registration is completed. When admission is charged or donations are accepted at an event held on campus, the Student Organization Business Office or Recreational Services must approve the method to collect the money. The persons interested in obtaining the Student Organization Business Office fee schedule should contact the Student Organization Business Office. Student organizations must make all financial arrangements with the Student Organization Business Office or Recreational Services.
• In the event the speaker or the issues are controversial, Leadership & Engagement, Recreational Services, or college/department/unit may require the sponsoring student organization to 1) obtain a tenured member of the faculty to chair the program or 2) provide for the speaker to be subjected to questions from the audience at some time during the program. For more information see University Operations Manual section V-28.
• Political Activities in Residence Halls: University Housing & Dining offers politicians and political organizations access to residence hall students on a limited basis. A politician or political organization is defined as: candidates for public office, candidates running for University of Iowa Student Government (USG), political organizations (both student and non-student) campaigning for election or campaigning on behalf of issues on the public ballot, or organizations that are sponsoring a political event.
• Student Government: Candidates for student government positions must follow election rules as established in the Student Elections Code.
• Tabling: Information tables may be reserved by a student organization to disseminate information, or to collect funds or other support (e.g., signatures, supplies) from persons outside its membership. Tables may be reserved in the IMU, Recreational Services facilities, or some colleges/departments/units. An Event Information Form may be required, and all reservation policies must be followed, for all table reservations in the IMU and Recreational Services facilities.
• Alcohol (Refer to Section VII below)
• Events that purposefully waste food (i.e. food eating contests and pie-in-the-face events)

IV. Publicity & Marketing

• Printing: Student organizations are prohibited from using student organization funds to purchase or obtain printing or copying services from vendors external to the University. Reimbursement to student organization members, who may have paid for external printing or copying services on behalf of the student organization, is prohibited.
• Design Approval/Licensing: All printed design orders must be approved by Leadership & Engagement or Recreational Services before any orders can be placed. Approval from University of Iowa’s Trademark Licensing Office is required if the design includes use of any University of Iowa trademarks, logos, or indicia. Please refer to the Student Organization Licensing Policy for complete information.
• All student organizations are responsible for complying with the University’s policy regarding “Acceptable Use of Technology Resources” located at http://opsmanual.uiowa.edu/
• Chalking is limited to: the use of water-soluble chalk (sidewalk chalk). The use of markers, paints, oil-based products, nonsoluble products, and spray chalks is prohibited.
• Chalking is permitted only on: horizontal (flat) sidewalks that are open to the elements (i.e., sidewalk that is not covered by a roof or overhang).
• Chalking is prohibited on all vertical surfaces and all non-sidewalk surfaces, both inside and outside, including benches, buildings, bus stops, bridges, columns, fountains, monuments, newsstands, overhangs, planters, poles, roads, rocks, signs, statues, stairs/steps, trash receptacles, trees, walls, and windows.
• areas outside health care facilities, including stand-alone facilities and mixed-use facilities that are embedded within another facility;
• veterinary medicine facilities;
• any facility or outdoor area used by the University’s athletics program or teams, including the following: all athletic and multi-use facilities (Duane Banks Field [baseball], Ashton Cross Country Course, Grant Field [field hockey], Pearl Field [softball], Kenyon Football Practice Facility, Kretzmeyer Track, Carver-Hawkeye Arena, Finkbine Golf Course, Recreation Building, Indoor Practice Facility, Field House, Campus Recreation and Wellness Center, Hawkeye Tennis and Recreation Center, and other outdoor and indoor practice facilities and playing fields); and
• any other outdoor areas where access is restricted to a majority of the campus community.
• Overwriting, erasing, defacing, or altering existing chalking is prohibited by anyone other than the person or organization who did the chalking, except that University facility and grounds personnel will clean and wash sidewalks, plazas, and other outdoor areas in the course of their usual and ordinary campus maintenance activities.
• Chalking that violates any federal or state law or any other University of Iowa policy is prohibited.
• Commercial solicitation, advertising and sales, including through chalking, are not permitted on campus except as explicitly permitted by IAC (681)13.15.
• Posting: Student organizations that wish to post on campus bulletin boards and Cambus, must adhere to the policies established by the respective facility or college/department/unit regarding the posting of materials on campus. Student organizations are responsible for contacting the appropriate facility staff or college/department/unit for applicable policies.
• Mass Email: Student organizations wishing to send a mass e-mail to members of the UI community must obtain permission from the vice president. Student organizations may send two mass e-mails per semester through the University mass e-mail system.
• Digital Signage: Student organizations that wish to post on campus digital signage (electronic displays) must adhere to the policies established by the respective facilities or colleges/departments/units regarding the posting of digital signage. Student organizations are responsible for contacting the appropriate facility staff or college/department/unit for applicable policies.
• Tabling: See section III.I
• Distribution of Fliers, Handbills, and Leaflets: Student organizations are allowed to distribute information to publicize an upcoming event that the organization is sponsoring that will be open to all students. Spontaneous distribution of materials does not require approval as long as it is not disruptive, does not interfere with scheduled University activities, or violates any University policy.

Student organizations must submit an event form through the University of Iowa student organization platform to a request for travel for reasons that are consistent with the organization’s/University’s mission and purpose, individual/organizational leadership and development, or to participate in programs that contribute to the University’s strategic priority of student success.

• Approved uses: Requests for vehicle usage from UI Fleet Services will only be approved for travel to a national or regional conference, or national or regional academic or athletic competition.
• Processes: Student organizations must complete and submit appropriate paperwork to the Student Organization Business Office or Recreational Services.
• Training: Student organization leaders must complete necessary training as required by UI Fleet Services.
• Related Costs: Student organizations are responsible for costs associated with vehicle rental.
• Cambus Rental: Student organizations may request to rent a Cambus vehicle and driver services for a student organization sponsored activity or event. Student organizations are responsible for costs associated with the rental.
• Guns/Weapons/Ammunition
• Bottled gases
• Individuals not approved to travel by Leadership & Engagement or Recreational Services
• Charter Buses: Student organizations may hire a professional charter service to provide transportation service for a sponsored event. Student organizations must follow University policy regarding contracts. See section below.
• Use of Personal Vehicles: In the event vehicles are not available from UI Fleet Services for approved purposes, student organizations may allow use of privately owned or rental vehicles for the above purposes with prior written authorization (the University may require proof of insurance). Rental fees, mileage, or other expenses incurred by individuals or organizations in violation of this policy are not an allowable University travel expense and will not be reimbursed. (From Ops Manual 19)
• Use of 3 rd Party Travel Agency: Student organizations may hire an external travel agency to provide planning services for an approved, organization trip. Student organizations must follow University policy regarding contracts. See section below.
• Lodging: Student organizations must follow all Student Organization Business Office or Recreational Services processes for reserving and paying for hotel accommodations for approved student organization travel.
• International Travel with the Exception of Canada: Student organizations are not allowed to plan, sponsor, or coordinate trips that occur outside of the continental United States.
• Discounts for Individuals Planning Trips: No student organization member(s) may receive discount benefits for providing event coordination or sale of travel packages, which are not made available to all travel participants.

VI. Contracts & Agreements

Student organizations and student organization members are not allowed to sign or enter into contracts or binding agreements on behalf of the student organization or the University. Contracts exist to outline expectations and responsibilities of the involved parties, and are not limited to arrangements involving payment for services. Event forms are required to be submitted through the University of Iowa student organization platform for all student organization events involving contracts.

• Agency or Business issued
• Service Agency Agreement: student organizations are required to follow the policies outlined by the Office of Risk Management, Insurance, and Loss Prevention when establishing these agreements.

VII. Alcohol

All student organizations must abide by University rules governing possession and consumption of alcoholic beverages. University alcohol regulations are described in Section II (D) of the Policies & Regulations affecting Students. University policy prohibits the use of University funds for the purchase of alcoholic beverages for events on campus or off-campus. In addition, any reference to alcohol in advertising for the activity shall be omitted. In the event that state laws concerning sale, possession, and consumption of alcoholic beverages are not observed during an event sponsored by a student organization, the organization’s registration may be revoked. Event forms are required to be submitted through the University of Iowa student organization platform for all student organization events including alcohol.

• Parameters: All beverage service (alcoholic and non-alcoholic) will be supplied by UI Catering subject to availability of facilities, staff and supplies. Under Iowa State law, the IMU, or any University department or organization, may not accept free alcoholic beverages from an outside source or funds from a distributor. The dispensing and control of alcoholic beverages within the IMU/Recreational Services facilities/academic colleges is the responsibility of UI Catering and IMU Administration with final approval from the vice president. All money collected by the UI Catering from alcohol sales will be deposited in a designated university account. Under no circumstances is a sponsoring organization to receive money collected as a result of alcohol sales.
• Undergraduate Student Organizations with a majority of membership under 21: Are not able to sponsor events with alcoholic beverage service on campus.
• Undergraduate Student Organizations with a majority of membership 21 and over: May be able eligible to request alcoholic beverage service as an amenity to a program held on campus.
• Graduate & Professional: Student organizations whose membership is composed of graduate or professional students over the age of 21 may request alcoholic beverage service as an amenity to a program held on campus.
• The student organization must submit a proposal outlining the rationale as to why the organization is requesting alcoholic beverage service. This proposal must accompany the event forms submitted through the University of Iowa student organization platform and Alcoholic Beverage Service Request Form.
• A request form for alcoholic beverage service must accompany the event forms submitted through the University of Iowa student organization platform and be submitted to the IMU Event Services Office no later than four weeks prior to the scheduled date of the event. If approved, all State, University, and IMU/University Catering policies and procedures related to the sale and service of alcoholic beverages will be observed. Additional information regarding the sale, distribution, and consumption of alcoholic beverages in the IMU and on campus is contained in the IMU Alcohol Beverage Service policy.
• University administration retains the right to require additional precautionary and risk management strategies to events where alcohol is present.
• The student organization must submit a proposal outlining the rationale as to why the organization is requesting alcoholic beverage service. This proposal must accompany the event forms submitted through the University of Iowa student organization platform.
• If the student organization is selecting a theme for the event, it must be an appropriate theme. The event theme should correspond with the values of the organization.
• Venue Facilities Agreement (your contract or agreement with the venue you are using for your event)
• Venue Certificate of Liability Insurance (proof of at least a million dollar insurance policy that verifies that the third party vendor is insured for any instances that may occur).
• Transportation Agreement and Insurance (if providing members and guests with bus services).
• Venue, room or establishment must be rented out exclusively to the sponsoring student organization (otherwise this is considered an OPEN EVENT, which is not allowed.)
• Liquor License

VIII. Hazing

• Hazing is any intentional or unintentional reckless action or situation – with or without consent – that endangers a student or creates risk of injury, mental or physical discomfort, harassment, embarrassment, and/or ridicule – whether on campus or off campus – for the purpose of initiation into, affiliation with, or as a condition for continued membership in any registered student organization at the University of Iowa.
• Acts of hazing include but are not limited to: compulsory alcohol or drug consumption; physical brutality; psychological cruelty; public humiliation; morally degrading activities; forced confinement; creation of excessive fatigue; required removal or destruction of public or private property; or any other activity that endangers the physical, mental, psychological, or academic well-being and/or safety of an individual. Any requirement imposed upon prospective, new, or current members which is not related to the organization's purpose is discouraged and will become the subject of a University investigation once the practice is brought to the attention of Leadership & Engagement/Recreational Services/academic colleges.
• This policy applies to all registered student organizations and their student leaders/members. Some University programs promulgate anti-hazing policies specifically for students participating in their programs. The Department of Athletics enforces a hazing policy, as does the UI Interfraternity Council, Panhellenic Council, Multicultural Greek Council, and National Pan-Hellenic Council. Copies are available at the respective department offices.

Student Organizations

• Registration of Student Organizations
• Discipline of Registered Student Organizations