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Marine Insurance - Assignment of marine policies and the applicable law

(raiffeisen zentralbank osterreich ag v five star general trading llc, may 2000, forthcoming in lloyd’s rep ir).

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Assignment of Marine Insurance Policies

As you are aware that a contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the insured, in the manner and to the extent thereby agreed, against transit losses, that is to say losses incidental to transit.

A contract of marine insurance may by its express terms or by usage of trade be extended so as to protect the insured against losses on inland waters or any land risk which may be incidental to any sea voyage.

In simple words the marine insurance includes;

A. CARGO INSURANCE which provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air.

Thus cargo insurance concerns the following :

(i) export and import shipments by ocean-going vessels of all types,

(ii) coastal shipments by steamers, sailing vessels, mechanized boats, etc.,

(iii) shipments by inland vessels or country craft, and

(iv) Consignments by rail, road, or air and articles sent by post.

B. HULL INSURANCE which is concerned with the insurance of ships (hull, machinery, etc.).

INSURABLE INTEREST

For effecting marine insurance like any other insurance, the assured must have an insurable interest. If there is no such interest, the policy would be a wagering contract and thus it will be void. Any person does have an insurable interest who is interested in a marine journey or who can get affected due to the losses and damages caused in the marine journey or adventure. The interest must subsist either at the time of effecting the insurance or at the time of loss. Any interest which is defeasible or contingent or partial can be insured. A lender under a bottomry bond or respondentia bond has insurable interest as well as master’s and seamen’s wages, advance freight are insurable, a mortgagee has also insurable interest.

The term “ Transfer” or “ Assignment” of policies of insurance are governed by the provisions of the Transfer of Property Act,1882 as amended from time to time. Please note that provisions of Section 38 of the Insurance Act,1938 only deals with transfer or assignment of Life Insurance Polices and the provisions of TP Act,1882 deal with other types of insurance policies.

“ Actionable Claim”-Section 3 of TP Act,1882 defines as – a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. The claim under a policy was regarded as property and is treated as an actionable claim under TP Act,1882 and the rules relating a transfer of actionable claim were held to apply to assignment of policies till specific statute laid down some specific rules for such assignments.

Section 6( e) of the Transfer of Property Act,1882 lays down that a mere right to sue cannot be transferred.

From above we find that an actionable claim means a claim to a debt. In its primary sense a debt is a liquidated money obligation and it is an essential feature of an action for debt that it should be for a liquidated debt or certain sum of money. The right to recover an ascertained and definite debt is not a mere right to sue and is not transferable. It is an actionable claim.

It means if a certain sum of money is due from any person , that sum is recoverable on assignment , and it is not mere right to sue to offend against the provisions of Section 6( e) of TP act,1882. As you know that in case of an actionable claim, there is a surety that there is some amount ,which can be recovered and same as in an Insurance Policy. The Sum Insured is the amount ,which will be recoverable at the time of loss or after assignment of insurance policy by the assignee. A policy of insurance is a present contract in the hand of an insured of which he has present right to the benefit although the fruits are to be enjoyed in future.

A policy on a man’s life expressed to be payable to his executors or administrators is a reversionary interest certain to fall in on the assured’s death or attainment of the stipulated age. A policy of insurance is a choose in action. A policy of life insurance represents money which is due and owned to the assured at his death and in the part of his estate. He has unlettered discretion to sell or charge it, to bequeath it or even to give it away.

“ASSIGNMENT” means- Transfer of interest from one to another is called assignment. In insurance also when rights and obligation under the contract are transferred from one to another, the same is called assignment of the policy. There can be another assignment in insurance which is assignment of benefits under the policies. Assignment of policy and assignment of benefits are quite distinct. Whereas in the former all the rights and obligations are transferred, in the latter only benefits (i.e. money due under the policy etc) are transferred. In insurance the assignment means assignment of rights under the contract. An assignee for all purposes becomes the owner of the policy and enjoys all rights thereunder. However, by assignment no change is made in the subject matter insured by the policy and it remains unaltered.”

ASSIGNMENT OF A CONTRACT OF INSURANCE AND ASSIGNMENT OF THE SUBJECT MATTER OF INSURANCE.

Assignment for the purpose of law o insurance may either be;

(a) The assignment of the subject matter of insurance ;or

(b) The assignment of the policy.

Please note that:- the question of the assignment of the subject matter of insurance in case of life and personal accident insurances does not arise, for the subject -matter in such cases is from its very nature unassignable.

The assignment of the subject-matter in the case of fire insurance is dealt as follows; “ As regards the assignment of the fire policies itself, it is transfer of the contract of insurance with its all rights and liabilities to the transferee and, therefore ,it is substitution of a new insured to all intents and purposes other than the original insured.”

THE SUBJECT MATTER OF INSURANCE

Anything in respect of which there is a risk of loss from maritime perils may be the subject of marine insurance. It will be recalled that there is a distinction between the subject matter of insurance and the subject matter of the contract of insurance, that every lawful marine adventure may be the subject of a contract of marine insurance, and that a contract of marine insurance may be extended to cover risks other than maritime perils in a narrow sense. However, even though a marine insurance contract may include risks arising inland, the contract must be substantially one relating to a marine adventure. Therefore, the subject matter of the insurance must be capable of exposure to maritime perils.

WHETHER FIRE AND ACCIDENT POLICIES ARE ASSIGNABLE?

It is clear from above discussion that a policy of life insurance is pure benefit policies and carry a definite sum or amount as Sum Assured will be payable at the time of accident or happening of assured perils. So in legal sense a Life Insurance Policy is an actionable claim or chose in action and hence assignable under provisions of TP Act,1882.

Since Fire Insurance Policies and other general insurance policies are pure indemnity policies. There is no amount is fixed that will be payable to the insured. Sum Insurance is the maximum amount to be payable in these policies but same will vary to the extent of loss suffered by the insured. In case of contract of indemnity , the amount payable is not certain or calculable it depends upon the loss suffered by the insured, and it becomes payable only if and when the loss occurs.

Therefore we conclude that a policy of fire, property accident insurances are in nature of right to sue for damages and the fact that they as such are not actionable claims is also apparent from the amendment of Section 6(4) of the TP Act,1882 to the effect that a mere right to sue cannot be transferred [Abu Mohammad Vs. SC chunder (1909) 36 Cal 345].

In these policies it may not certain that loss may take place , and also the extent of damages are also not certain. For an actionable claim it must be perfected and absolute , and not merely a sum of money which may or not become payable at future time.

It was held that policies of insurance against loss or damages by fire are not in their nature assignable nor can the interest in them be transferred from one person to another without the express consent of the insurance company. Suppose an insurance policy promises to indemnify “A” against loss by fire. He can assign his right of action against the insurance company to “B”, so that if “A” suffers loss “B” may recover in respect of it , but “B” cannot without the consent of insurance company’s consent ,convert promise to indemnify “A” to a promise to indemnify “B” , because that would not be an assignment but an attempted novation.

PLEASE NOTE THAT : Property and liability insurances are personal contracts, and do not run with the property if it is sold or otherwise disposed of or with a transfer of liabilities of the insured. Therefore, both at common law and equity, as assignment of a policy of insurance can only be valid of the insurer consents to this course, whereby, in truth a new contract of insurance is effected between the assignee and the insurer, and that between the assignor (the original insured) and the insurer lapses.”

RESTRICTIONS ON ASSIGNABILITY IMPOSED BY THE COMPANY; If parties to a contract of insurance agree to impose restrictions to the assignability of the policy or to make it assignable only with the consent of the company , effect must be given to such restrictions. But such provision does not apply to the case of the person on whom the policy has devolved by the operation of law, or in the case of person who is under obligation to insure. If insurance policy is not assignable they assignee has no right to sue or call the insurance company in case of loss or damage due to insured peril. In this case the right person is the insured /assured to claim loss /damage under insurance policy.

PLEASE NOTE THAT: life policies are now construed not as a contract of indemnity but to pay a certain sum in a certain vent depending on the duration of human life. If at the time the contract of insurance is made the person affecting insurance has an insurable interest in the life of the person assured the policy is a valid, notwithstanding the fact that the person effecting the insurance ceased to have an interest in the life assured at the time when policy become due. It follows from this that the assignment of a life policy would be valid and would pass to the assignee the rights to the insurance money, even though the assignor’s interest in the life had ceased to have an interest in the life assured at the time when the policy became due.

It follows from above that the assignment of a life policy would be valid and would pass to the assignee the rights to the insurance money, even through the assignor’s in the life had ceased before the date of the assignment. It means an assignment to person without interest is not invalid assignment.

It is obvious that the contract of insurance may be assigned in one of two ways.

i) In the first place, the policy may be assigned without the assignment of the property insured; or,

ii) secondly, the policy may be assigned together with the assignment of the property insured. The distinction is important, and must be kept in mind.

Where the assignment is of the policy only, there is no difficulty in reconciling this with the nature of a personal contract.

All that is assigned in this case is the right to receive the insurance money, in case the interest of the person originally insured suffers loss from the perils insured against. The assignment is like the assignment of any other chose in action.

The assignee is merely the person designated to receive the insurance, and he acquires only the rights of the assignor, and is subject to all the defences which the insurers have or may have against the person originally insured.

No element of the personal contract is violated, for it is of no consequence to the insurers who receives the insurance money, so long as they are free from the claims of the person originally insured.

But where the property insured is sold, and the policy is assigned, an entirely different question is raised. In this case, the person originally insured has parted with his entire interest in the subject-matter of the contract. He can suffer no loss, for he had no interest in the property at the time of the loss. The insurers cannot indemnify him, for he has no interest which can be the subject of indemnity. That interest is in the assignee, a stranger to the contract, who is neither a party nor a privy to the original contract, and it is he who suffers the loss. If, then, the contract can be assigned, seemingly the whole conception of a personal contract will be done away with.

ASSIGNMENT OF MARINE INSURANCE POLICY

The terms and conditions of Marine Insurance Policies are governed provisions of the Marine Insurance act,1963.

“(1) A marine policy is assignable unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss.

(2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.

(3) A marine policy may be assigned by endorsement thereon or in other customary manner.

SECTION 17 OF MARINE INSURANCE ACT,1963 provides that

Assignment of interest.—Where the assured assigns or otherwise parts with his interest in the subject-matter insured, he does not thereby transfer to the assignee his rights under the contract of insurance, unless there be an express or implied agreement with the assignee to that effect.

But the provisions of this section do not affect transmission of interest by operation of law.

ACCORDING TO SECTION 25 OF THE MI ACT,1963 provides that a Marine Insurance Plicy must specify ;

(1) the name of the assured, ore of some person who affects the insurance on his behalf;

(2) the subject-matter insured and the risk insured against.

(3) the voyage, or period of time, both, as the case may be, covered by the insurance;

(4) the sum or sums insured;

(5) the name or names of the insurer or insurers.

Contract must be embodied in policy-

According to Section 24 of the marine insurance act 1963, A contract of marine insurance shall not be admitted in evidence unless it is embodied in a Marine policy in accordance with this act (Marine Insurance Act 1963). The policy may be executed and issued either at the time when the contract is concluded or afterwards.

SECTION 52 provides that –

When and how policy is assignable.—(1) A marine policy may be transferred by assignment unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss.

(2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the suit had been brought in the name of the person by or on behalf of whom the policy was effected.

SECTION 53 OF MI ACT,1963 .

Assured who has no interest cannot assign.—Where the assured has parted with or lost his interest in the subject-matter insured, and has not, before or at the time of so doing expressly or impliedly agreed to assign the policy, any subsequent assignment of the policy is inoperative.

Provided that nothing in this section affects the assignment of a policy after loss.

SECTION 52 provides as to when and how the marine policy may be transferred. It says that a Marine Policy may be transferred by assignment unless it contains express terms, which prohibits any assignment of the policy. It also provides that such assignment can be made before or after the loss has occasioned.

SECTION 52(2) -provides that once assignment is made then the assignee is entitle to sue in his name whereas the insure/defendant is also entitled to raise all such defences against the assignee ,which are available to him against the origiional insured i.e. the assigner.

SECTION 17 -provides that where the assured assigns or otherwise parts with his interest in the subject matter insured, he (insured) does not thereby transfer to the assignee his rights under the contract of insurance unless there is an express or implied agreement with the assignee of that effect. This section does not affect transmission of interest by operation of law.

Please Note That – Section 17 even after making an assignment by the insured of their contract of insurance policy, the rights of insured under the contract of insurance policy are not assigned in favour of assignee by the deed of assignment but they are continued to remain with the insured.

PLEASE NOTE THAT

A marine insurance policy is assignable either before or after the loss, unless it contains terms expressly prohibiting assignment. A policy on goods is generally freely assignable. Merchandise like tea, jute and wheat etc., change hands before they reach their destination and policies on them must be freely transferable. Both policies on ship or on freight are subject to restrictions on assignment.

An assignment by the insured of his interest in the subject-matter insured does not transfer his rights in the policy of insurance thereon to the assignee, unless there is an express or implied agreement to that effect. But a transmission of interest in the subject –matter insured by operation of law- such as by death or insolvency- will operate as a transfer of the policy also.

An assured who has assigned or lost his interest in the insured property cannot subsequently assign the policy of insurance thereon. Unless before or at the time of assigning the property, he has expressly or impliedly agreed to assign the policy. However, he can always assign the policy after loss. The marine policy may be assigned by endorsements on the policy itself or in any other customary manner. On the assignment of the beneficial interest in the policy, the assignee is entitled to sue thereon in his name.

CONCLUSION : from above discussion it is clear that in case of marine insurance ,an Insurable interest must be present only at the time of claiming and policy is easily assignable.It may be assigned to any, who has insurable interest or going to acquire at later date. Cargo insurance assignment does not even require consent of insurer, which is necessary in hull insurance.Transfer of subject matter does not automatically transfer insurance policy also. Person who lost or parted with insurable interest cannot transfer the policy subsequently. We hereby conclude that a Marine Insurance Policy is freely assignable unless expressly prohibited through some terms and conditions in the insurance policy or insured and the insurance company has agreed to prohibit any assignment of insurance policy. There is no inherent difference between the contract of marine insurance and the contract of fire insurance. Both are contracts of indemnity; both are personal contracts with the insured, and both are mercantile contracts ordered and controlled by the custom of merchants. Yet the courts seem to have ruled from the earliest times that, in the case of fire insurance, no assignment of the policy and property will be valid without the consent of the insurer thereto, while in marine insurance no such consent is necessary.

DISCLAIMER above article is only for information and knowledge of readers. In case of necessity do consult with insurance professional for more clarity and understanding on subject matter.

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Assignment of Marine Insurance Policy | Insurance Law

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• Assignments In Insurance Law

Introduction

• 1.1 Nature Of Insurance Policies

1.2 Assignment

• 2. Application Of English Law

2.1 Generally

• 2.2 Policies Of Assurance Act 1867

2.3 Marine Insurance Act 1906

3. marine insurance, 4. property insurance, 5. motor insurance, 6. life insurance, 6.1 legal assignment, 6.2 equitable assignment, 6.3 incomplete assignment, 6.4 priorities.

• 7.1 Assignment Of Insurance Policies
• 7.2 Assignment Of The Proceeds Of Insurance Policies
• 7.3 Assignment Of The Subject Matter Of Insurance Policies
• 7.4 Assignment By Operation Of Law

7.5 Conditions Prohibiting Assignment

8. conclusion, assignments in insurance law.

The concept of assignments in insurance law takes on many forms - firstly due to the various branches of insurance law and secondly due to the various components in an insurance transaction that can be assigned. The format of this discussion, therefore, is reflective of this framework.

Assignments are first discussed in the context of the following branches of insurance law:

(i) marine insurance,

(ii) property insurance,

(iii) motor insurance, and

(iv) life insurance.

The next stage of this discussion focuses on what may be assigned in an insurance transaction and how such assignments are legally effected, namely, the assignment of:

(a) an insurance policy,

(b) the proceeds of an insurance policy, and

(c) the subject matter of an insurance policy.

1.1 Nature of Insurance Policies

A. A. Tarr, Kwai-Lian Liew & W. Holligan writes:

“The origins of insurance date back thousands of years. For example, a central feature of insurance, that of risk interference, was incorporated in commercial arrangements effected by the Babylonians, Phoenicians, Greeks and Romans. However, the infancy of the modern insurance contract is founded on the practices adopted by Italian merchants in the 14th century. These merchants fostered the development of marine insurance and were reluctant to accept the numerous and diverse risks associated with the mercantile adventure of transporting goods across the sea; an early policy entered into in 1385 insured a ship and cargo against loss arising ‘from Acts of God, of the sea, of fire, of jettison, of confiscation by princes or cities or any other person, of reprisal, mishap or any other impediment’. Merchants in their relations with one another tended to uniformity on commercial matters and this tendency led to the rapid dissemination if marine insurance practices to other countries, and, in particular, to the low countries, Spain and England.” [1]

Lord Hailsham of St. Marylebone writes:

“Non-marine insurance first made its appearance in the form of life and fire insurance, but until the middle of the nineteenth century these three [2] types of insurance comprised, in practice, substantially the whole range of insurance.”

The practice of taking insurance and property and later, lives, has a long and rich history. Unsatisfied with leaving the health and safety of property and lives to the capricious whims of fate alone, our ancestors have sought to ‘hedge their bets’ by entering into an insurance transaction.

John Lowry & Philip Rawlings writes:

“The aim of insurance is to shift risk from one person (the insured) to another (the insurers): the owner of a house enters into a fire policy under which an insurer, in exchange for a premium paid by the insured, agrees to pay for damage caused to the property by fire.” [3]

Professor K. S. N. Murthy & K. V. S. Sarma writes:

“The aim of all insurance is to protect the owner from a variety of risks which he anticipates.” [4]

John Birds and Norma J. Hird observe that:

“It is suggested that a contract of insurance is any contract whereby one party assumes the risk of an uncertain event, which is not within his control, happening at a future time, in which event the other party has an interest, and under which contract the first party is bound to pay money or provide its equivalent if the uncertain event occurs.” [5]

In Rayner v Preston [6] , Brett L.J. explained the nature of a contract of insurance in the following terms:

“Now, in my judgment, the subject-matter of the contract of insurance is money, and money only. The subject-matter of insurance is a different thing from the subject-matter of the contract of insurance. The subject-matter of insurance may be a house or other premises in a fire policy, or may be a ship or goods in a marine policy. These are the subject-matter of insurance, but the subject-matter of the contract is money, and money only. The only result of the policy, if an accident which is within the insurance happens, is a payment of money. It is true that under certain circumstances in a fire policy there may be an option to spend the money in rebuilding the premises, but that does not alter the fact that the only liability of the insurance company is to pay money. The contract, therefore, is a contract with regard to the payment of money, and it is a contract made between two persons, and two persons, only, as a contact.” [7]

Poh Chu Chai writes:

“A contract of insurance constitutes a highly personal contract and as a general rule, such a contract is generally not assignable.” [8]

The insurer fixes the premium after considering the particular risks associated with the property and handling of the property in the hands of the insured. As such, as a general rule, an insurance policy is not casually assignable to another party. Nevertheless, assignments are not an unheard of option in an insurance transaction.

Before embarking on the discovery of how assignments in insurance law can be legally effected, it may prove beneficial to consider the nature of what is meant by this phrase which takes centre stage in this discussion, an ‘assignment’.

R. C. Kohli explains:

“Transfer of interest from one to another is called assignment. In insurance also when rights and obligation under the contract are transferred from one to another, the same is called assignment of the policy. There can be another assignment in insurance which is assignment of benefits under the policies. Assignment of policy and assignment of benefits are quite distinct. Whereas in the former all the rights and obligations are transferred, in the latter only benefits (i.e. money due under the policy etc) are transferred. In insurance the assignment means assignment of rights under the contract. An assignee for all purposes becomes the owner of the policy and enjoys all rights thereunder. However, by assignment no change is made in the subject matter insured by the policy and it remains unaltered.” [9]

David Norwood and John P. Weir writes:

“There is no special form of assignment document, no magic words which must be used to create a valid and effective legal assignment. As was expressed in one case [10] : ‘[An assignment] ... may be addressed to the debtor. It may be couched in the language of command, It may be a courteous request. It may assume the form of mere permission. The language is immaterial if the meaning is clear.’

The only important point is that the instrument recording the assignment must make it clear that one party with a contractual right against another party is transferring their right of enforcement of the obligations of the contract to another person.” [11]

Malcolm A. Clarke writes :

“Assignment must have been intended. Intention is ascertained by the substance rather than the form of what is said or done.” [12]

2. Application of English Law

Another introductory matter which must be considered in this discussion is the source of law in the insurance arena in Malaysia.

The governing statute in Malaysia in the field of insurance law is the Insurance Act 1996 [13] . This Act, however, does not seem to mention the issue of assigning insurance policies. As such, the provisions of the Civil Law Act 1956 [14] may be referred to in order to provide valuable guidance on the matter.

Section 3 of the Civil Law Act 1956 provides:

“Save so far as other provision has been made or may hereafter be made by any written law in force in Malaysia, the Court shall -

(a) in West Malaysia or any part thereof, apply the common law of England and the rules of equity as administered in England on the 7 th day of April, 1956;...

Provided always that the said common law, rules of equity and statutes of general application shall be applied so far only as the circumstances of the States of Malaysia and their respective inhabitants permit and subject to such qualifications as local circumstances render necessary.”

Section 5(1) of the Civil Law Act 1956 makes particular reference to life and fire insurance. This section provides that :

“In all questions or issues which arise or which have to be decided in the States of West Malaysia ... with respect to the law of ... marine insurance, average, life and fire insurance ... the law to be administered shall be the same as would be administered in England in the like case at the date of the coming into force of this Act [15] , if such question or issue had arisen or had to be decided in England, unless in any case other provision is or shall be made by any written law.”

With the aid of these provisions, English law has often been referred to for guidance in resolving legal dilemmas in the field of insurance law and since the Malaysian Act on point does not seem to have covered the matter of the assignment of insurance policies, as will be discussed below, many academicians and Malaysian judges have relied on the principles enunciated in the English courts and Parliament on this matter.

2.2 Policies of Assurance Act 1867

There is one particular dilemma highlighted by Nik Ramlah Mahmood with regard to the applicability of the Policies of Assurance Act 1867 [16] of England with regard to the legal assignment of life policies. As this author explains :

“In England, a life policy can be legally assigned in accordance with the Policies of Assurance Act 1867 which deals specifically with such assignment or in accordance with section 136 of the Law of Property Act 1925 [17] which deals with the assignment of a chose in action. [18] ...

As there is no parallel local statute, the Policies of Assurance Act 1867 (UK) is assumed to be applicable in Malaysia and is generally regarded as the only basis for legal assignment of a life policy. The validity of this assumption, however, is questionable. There is in Malaysia a provision similar to section 136 of the Law of Property Act 1925 (UK). This is section 4(3) of the Civil Law Act 1956 which provides for the absolute assignment of a chose in action. The existence of this provision can have two possible effects on the law relating to legal assignment of life policies in Malaysia.

One possible effect is that contrary to popular belief and practice, the Policies of Assurance Act 1867 (UK) is in fact inapplicable in Malaysia. According to section 5 of the Civil Law Act 1856, an English Act like the 1867 Act can only be applied if there are no local statutory provisions on the related issue. As the assignment of a life policy is in fact the assignment of a chose in action and there is a local provision on this, there seems to be no valid justification for applying the Policies of Assurance Act 1867 in Malaysia.

The other possible effect is that there are, in Malaysia as in England, two different statutory provisions relating to the assignment of life policies, one under the Policies of Assurance Act 1867 (UK) and the other under the Civil Law Act 1956. As the Civil Law Act provision deals with the assignment of a chose in action generally, its existence should not prevent the application of an English statute which deals specifically with the assignment of life policies.

While a finding by a Malaysian court in favour of the first possible interpretation may alarm those in the insurance industry who have always regarded the Policies of Assurance Act 1867 of England to be the sole basis for the legal assignment of a life policy, such a finding may in the long term bring the practices of the industry in Malaysia in line with those in England where such assignments are now more commonly done under the Law of Property Act than under the Policies of Assurance Act.” [19]

There is no statute in Malaysia that deals exclusively with the area of marine insurance. As such, as Salleh Abas C.J. clarified in The “Melanie” United Oriental Assurance Sdn. Bhd. Kuantan v. W.M. Mazzarol [20] :

“... we must refer to ... the Marine Insurance Act 1906 of the United Kingdom. This Act is made applicable to Malaysia as part of our law by virtue of section 5(1) [21] of our Civil Law Act 1956.” [22]

The Marine Insurance Act 1906 [23] contains a few sections dealing with the concept of assignment in marine insurance. Section 50 of this Act states :

“(1) A marine policy is assignable unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss.

(2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.

(3) A marine policy may be assigned by indorsement thereon or in other customary manner.” [24]

Section 51 of this Act reads :

“Where the assured has parted with or lost his interest in the subject-matter insured, and has not, before or at the time of so doing, expressly or impliedly agreed to assign the policy, any subsequent assignment of the policy is inoperative.

Provided that nothing in this section affects the assignment of a policy after loss.” [25]

In Colinvaux’s Law of Insurance , section 51 of this Act is explained as having the effect such that :

“This rule is an obvious corollary of insurable interest: if the assignor loses insurable interest, the policy lapses and there is thus nothing to assign. In the converse case, where the assured assigns the policy without assigning the subject-matter, the assignee has no insurable interest and is thus unable to sue on the policy.” [26]

Section 15 of this Act provides :

“Where the assured assigns or otherwise parts with his interest in the subject-matter insured, he does not thereby transfer to the assignee his rights under the contract of insurance, unless there can be an express or implied agreement with the assignee to that effect.

But the provisions of this section do not affect a transmission of interest by operation of law.” [27]

In the book, Macgillivray & Parkington on Insurance Law - relating to all risks other than marine [28] , the position when the subject-matter insured is assigned is summarised as :

“If the assured voluntarily parts with all his interest in the subject-matter of the insurance policy, the policy lapses since the assured no longer has any insurable interest and can have suffered no loss [29] . The assignment must, however, be complete [30] and if the assured retains any insurable interest he will be able to recover under the policy; thus, if he enters into a contract to convey the subject-matter and the subject-matter is lost or damaged, the assured can still recover even though the risk has passed to the purchaser [31] ; until the vendor is paid he cannot be certain of receiving the purchase price and it is in effect this risk which, in such a case, is the subject of insurance. [32] The policy will probably remain in force ever after conveyance if the purchase price has not been paid, provided that the vendor has not parted with his lien. The lien will ensure that the assured still has an insurable interest. [33] An assured who enters into a contract of sale will often agree to transfer the insurance policy and, if he effectively does so, the transferee will be able to recover under it.”

Digby C. Jess writes:

“Property and liability insurances are personal contracts, and do not run with the property if it is sold or otherwise disposed of or with a transfer of liabilities of the insured. Therefore, both at common law and equity, as assignment of a policy of insurance can only be valid of the insurer consents to this course, whereby, in truth a new contract of insurance is effected between the assignee and the insurer, and that between the assignor (the original insured) and the insurer lapses.” [34]

In The North of England Pure Oil-Cake Company v The Archangel Maritime Insurance Company, [35] a firm insured a cargo of linseed to be transported by sea. The policy was to cover every stage of the voyage as if each stage of the voyage were separately insured and the policy of insurance was expressed to be for the benefit of the firm and the assignees. During the voyage, the firm sold the cargo. Part of the cargo was sunk due to perils within the terms of the policy. Later, the firm assigned the policy to the purchasers of the linseed.

Cockburn C.J. in this case held :

“We are agreed on one point, which entitles the defendants to judgment, viz. that, the policy not having been assigned until after the interest of the assignors had ceased, an effective assignment was impossible.” [36]

In Sadler’s Company and Badcock, [37] a lessee of a house insured the house from fire. After the lessee’s lease expired but while the insurance policy was still in effect, the house burnt down. Following the destruction of the house, the lessee assigned the policy to the landlords. The landlords then attempted to claim the benefit of the policy from the insurance company.

The Lord Chancellor in this case decided that a policyholder could not assign a policy at a point in time when the policyholder does not have any interest in the insured property. The lessee in this case was not able to assign the policy since at the time the lessee purported to assign the policy the lessee had no longer any interest in the house. In the words of the judge :

“And I am of opinion that the party insured ought to have a property in the thing insured at the time of the insurance made, and at the time of the loss by fire, or he cannot be relieved. Mrs. Strode [the lessee] had no property at the time of the fire, consequently no loss to her; and if she had no interest, nothing could pass to the plaintiffs [landlords] by assignment. ...

If the insured was not to have a property at the time of the insurance or loss, any one might insure another’s house, which might have a bad tendency to burning houses. Insuring the thing from damage is not the meaning of the policy, it must mean insuring Mrs. Strode from damage, and she has suffered none.” [38]

In The Ecclesiastical Commissioners for England v The Royal Exchange Assurance Corporation, [39] one ecclesiastical body sold a farm that was covered by a fire insurance policy to another ecclesiastical body. At the time of the sale, no mention was made about the assignment of the policy. After the sale, the farm burnt down and the purchaser seeks to claim on the policy.

The insurance company argues that there was no valid assignment of the policy and as such, the insurance company is not liable to the seller since the seller had no interest in the insured property and thus have no insurable interest at the time of the accident nor the purchaser since the policy has not been validly assigned to the purchaser. Charles J. in this case agreed with the arguments of the insurance company and held:

“The whole transaction was complete. Can anybody sue? The Commissioners [seller] cannot sue because there has been no assignment of the policy to them. ... In this case the vendors have conveyed away their property and received their consideration ... I must therefore give judgment for the defendants [insurance company], with costs.” [40]

In Collinridge v The Royal Exchange Assurance Corporation, [41] a company which owned a number of buildings insured the same against fire. These buildings were indeed destroyed by fire. However, before the fire took place, these buildings were in the process of being acquired by the Metropolitan Board of Works. There was no mention of an accompanying assignment of the fire insurance policy. The Board had yet to make payments for the conveyance. The insurance company disputes liability.

Mellor J. in this case held:

“It appears that the plaintiff at the time of the fire was in the position of unpaid vendor, and had possession of his premises. Under these circumstances, I think there is nothing to prevent him from bringing an action to recover the amount which he has insured.” [42]

Lush J. in this case concurred :

“The plaintiff is in the position of a person who has entered into a contract to sell his property to another. ... The contract will no doubt be completed, but legally the buildings are still his property. The defendants [insurance company] by their policy undertook to make good any loss or damage to the property by fire. There is nothing to shew that any collateral dealings with the premises, such as those stated in this case, are to limit his liability. If the plaintiff had actually conveyed them away before the fire, that would have been a defence to the action, for he would have then have had no interest at the time of the loss. But in the present case he still has a right to the possession of his property, and the defendants are bound to pay him the insurance money ...” [43]

In Rayner v Preston, [44] a set of buildings covered by a fire insurance policy were contracted to be sold. After the date the contract was signed but before the contract was completed, the buildings were damaged by fire. The contract contained no mention of the fire insurance policy. The insurance company made payments to the seller of the buildings. The purchaser seeks to claim this money or to compel the seller to apply the money received towards making repairs to the buildings.

The first argument proposed by the purchaser was that although the contract made no specific mention of the insurance policy, the contract gave the purchaser a right to all contracts related to the buildings. Cotton L.J. in this case was not in support of this contention and held :

“The contact passes all things belonging to the vendors appurtenant to or necessarily connected with the use and enjoyment of the property mentioned in the contract, but not, in my opinion, collateral contracts; and such, in my opinion, ... the policy of insurance is. It is not a contract limiting or affecting the interest of the vendors in the property sold, of affecting their right to enforce the contract of sale, for it is conceded that, if there were no insurance and the buildings sold were burnt, the contract for sale would be enforced. It is not even a contract in the event of a fire to repair the buildings, but a contract in that event to pay the vendors a sum of money which, if received by them, they may apply in any way they think fit. It is a contract, not to repair the damage to the buildings, but to pay a sum not exceeding the sum insured or the money value of the injury. In my opinion, the contract of insurance is not of such a nature as to pass without apt words under a contract for sale of the thing insured.” [45]

The next argument proposed by the purchaser was that between the time of the contract being made and the conveyance being completed, the seller was a trustee of the property for the purchaser and as such, the seller is a trustee for the purchaser with regard to the money received for the property during this period of trusteeship. This argument did not find favour with the court either and Cotton L.J. held:

“An unpaid vendor is a trustee in a qualified sense only, and is so only because he has made a contact which a Court of Equity will give effect to by transferring the property sold to the purchaser, and so far as he is a trustee he is so only in respect of the property contracted to be sold. Of this the policy is not a part. A vendor is in no way a trustee for the purchaser of rents accruing before the time fixed for completion, and here the fire occurred and the right to recover the money accrued before the day fixed for completion. The argument that the money is received in respect of the property which is trust property is, in my opinion, fallacious.” [46]

Brett L.J. in this case concurred :

“... I venture to say that I doubt whether it is a true description of the relation between the parties to say that from the time of the making of the contract, or at any time, one is ever trustee for the other. They are only parties to a contract of sale and purchase of which a Court of Equity will under certain circumstances decree a specific performance. But even if the vendor was a trustee for the vendee, it does not seem to me at all to follow that anything under the contract of insurance would pass. As I have said, the contract of insurance is a mere personal contact for the payment of money. It is not a contract which runs with the land. If it were, there ought to be a decree that upon completion of the purchaser the policy be handed over. But that is not the law. The contract of insurance does not run with the land; it is a mere personal contract, and unless it is assigned no suit or action can be maintained upon it except between the original parties to it... [47]

“I therefore, with deference, think that the Plaintiffs here [purchaser] cannot recover from the Defendant [seller], on the ground that there was no relation of any kind or sort between the Plaintiff and the Defendant with regard to the policy, and therefore none with regard to any money received under the policy.” [48]

James L.J. in this case gave a dissenting judgment on this point and held that :

“... the relation between the vendor and the purchaser became, and was in law, as from the date of the contract and up to the completion of it, the relation of trustee and cestui que trust , and that the trustee received the insurance money by reason of and as the actual amount of the damage done to the trust property.” [49]

In Castellain v Preston and Others, [50] the defendants owned a piece of land and buildings which were covered by a fire insurance policy. The defendants entered into negotiations to sell the premises to their tenants. In the midst of these negotiations, a fire broke out which damaged a part of the buildings. By the time of the fire the contract of sale was signed, a deposit was paid but the contract was not completely performed as yet. The insurance company made payments to the defendants on the insurance policy for the fire. The tenants paid the full purchase price and proceeded with the slae despite the fire. The insurance company brings the present action.

Brett L.J. commented on the foundation of insurance law :

“The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. That is the fundamental principle of insurance, and if ever a proposition is brought forward which is at variance with it, that is to say, which either will prevent the assured from obtaining a full indemnity, or which will give to the assured more than a full indemnity, that proposition must certainly be wrong.” [51]

Cotton L.J. added :

“The policy is really a contract to indemnify the person insured for the loss which he has sustained in consequence of the peril insured against which has happened, and from that it follows, of course, that as it is only a contract of indemnity, it is only to pay that loss which the assured may have sustained by reason of the fire which has occurred. In order to ascertain what that loss is, everything must be taken into account which is received by and comes to the hand of the assured, and which diminishes the loss. It is only the amount of the loss, when it is considered as a contract of indemnity, which is to be paid after taking into account and estimating those benefits or sums of money which the assured may have received in diminution of the loss... [52]

Therefore the conclusion at which I have arrived is, that if the purchase-money has been paid in full, the insurance office will get back that which they have paid, on the ground that the subsequent payment of the price which had been before agreed upon, and the contract for payment of which was existing at the time, must be brought into account by the assured, because it diminishes the loss against which the insurance office merely undertook to indemnify them [53] .”

Mahinder Singh Sidhu observes :

“An assignment of the policy means a ‘change of interest’ i.e., somebody else is substituted for the original insured in the motor insurance contract. All motor policies can be validly assigned but the insurer’s prior consent is essential.” [54]

Mahinder Singh Sidhu also writes :

“A motor insurance contract is always personal in the sense that some human element is inevitably involved, and in a technical sense, the insurer’s decision to enter on the contract depends on the personal qualities of the insured and the insurer’s confidence in him. The insurers have the right to question and investigate the proposed insured and vary the terms of the contract. If an assignment takes place it is termed as a “novation”, since the assignment virtually creates a new contract with the assignee.

A valid assignment gives the assignee the right to sue and gives the insurance company a good legal discharge without the necessity of joining the assignor. Where there is a conditional sale of a car to the new purchaser, the ownership of the car still remains with the insured, and does not amount to any transfer of his insurable interest. But where there has been a complete sale and transfer of the vehicle and handing over of the policy documents to the purchaser, it does not create a valid assignment, though there is a transfer of interest of the subject matter of the insurance. The transfer of the insurable interest causes the policy to lapse, and the purchaser has no insurance cover if he drives the car and meets with an accident.” [55]

In Peters v General Accident Fire & Life Assurance Corporation Ltd. [56] , the owner of a motor van sold the vehicle to another person and purportedly assigned the motor insurance policy for the van to the purchaser. After the sale, the purchaser was involved in an accident and attempted to make a claim to the insurance company based on the motor insurance policy purportedly assigned. The insurance company disputed the purchaser’s right to claim under the insurance policy issued to the seller of the van.

Sir Wilfred Greene M.R. in this case decided that:

“Assuming in his favour that there was an intention to assign the policy, the fundamental remains : Is this policy one which is capable of assignment? The judge held that it was not, and I am in entire agreement with that.” [57]

The effect of the motor insurance policy was that the insurance company undertook to indemnify the policyholder in the case of an accident while the car was driven by the policyholder or anyone else driving the vehicle with the policyholder’s consent or permission.

Sir Wilfred Greene M.R. explained the effect of deciding that such a policy was assignable:

“It appears to me as plain as anything can be that a contract of this kind is in its very nature not assignable. The effect of the assignment, if it were possible to assign, was ... that, from and after the assignment, the name of Mr. Pope, the assignee [the purchaser], would have taken the place of that of Mr. Coomber [the seller] in the policy, and the policy would have to be read as though Mr. Pope’s name were mentioned instead of Mr. Coomber’s. In other words, the effect of the assignment would be to impose upon the insurance company an obligation to indemnify a new assured, or persons ordered or permitted to drive by that new assured. That appears to be altering in toto the character of the risk under a policy of this kind. The risk that A.B. is going to incur liability by driving his motor car, or that persons authorised by A.B. are going to cause injury by driving his motor car, is one thing. The risk that C.D. will incur liability by driving a motor car, or that persons authorised by C.D. will incur liability through driving a motor car, is, or may be, a totally different thing.” [58]

One reason given by Sir Wilfred Greene M.R. for deciding that an insurance policy of this kind was not capable of assignment was that :

“The insurance company in this case, as in every case, make inquiries as to the driving record of the person proposing to take out a policy of insurance with them. The business reasons for that are obvious, because a man with a good record will be received at an ordinary rate of premium and a man with a bad record may not be received at all, or may be asked to pay a higher premium. The policy is, in a very true sense, one in which there is inherent a personal element of such a character as to make it, in my opinion, quite impossible to say that the policy is one assignable at the volition of the assured.” [59]

The second reason given by the judge as the basis of his judgement was that the according to the Road Traffic Act 1930 [60] in the United Kingdom, it is unlawful for anyone to use a motor vehicle or permit anyone else to use the motor vehicle unless that user or other person permitted by the user is covered by a motor insurance policy for the use of the motor vehicle. [61] Additionally under the statute, if a judgment is obtained in respect of a liability covered by the policy against any person insured by the policy, then the insurance company is generally liable to make the required payment to the person who has the benefit of the judgment. [62]

The purchaser of the car in this case argued that he was driving the car with the permission of the policyholder [63] and as such, should receive the same benefit of coverage in terms of the insurance policy. Based on this rationale, the purchaser argued that since judgment was obtained against him in respect of the accident and since he was covered by the policy, the insurance company should be liable under the judgment and make payments to the party who obtained the judgment. The court, however, held that :

“At the date when the accident took place, the entire property in this car was vested in Pope [the purchaser]. He had bought the car. On the sale of the car, the property passed to him ... The property, therefore, passed to the purchaser long before this accident took place. The circumstance that he had not paid the whole of the purchase price is irrelevant for that purpose, because that circumstance does not leave in the vendor, Mr. Coomber, any interest in the car. There is no vendor’s lien, or anything of that sort. The car had become the out-and-out property of Pope. When Pope was using that car, he was not using it by the permission of Coomber [the seller]. It is an entire misuse of language to say that. He was using it as owner, and by virtue of his rights as owner, and not by virtue of any permission of Coomber.” [64]

In Smith v Ralph, [65] the scenario was basically the same as above, namely, that the purchaser of a motor vehicle again tried to claim the coverage of the insurance policy issued to the seller of the motor vehicle on the basis that the purchaser was driving the motor vehicle with the permission or consent of the policyholder.

Lord Parker of Waddington C.J. in this case similarly held that the purchaser was not covered by the policy as the policyholder could not assign any rights in the policy when he no longer had any interest in the vehicle covered by the policy. In the words of the judge :

“Any permission or authority given by the policyholder ... could not extend beyond the time when he ceased to be a policyholder in the sense of having any insurable interest.” [66]

In Nanyang Insurance Co. Ltd. v. Salbiah & Anor, [67] a car was bought on behalf of a company. The company then entered into negotiations to sell the car to the purchaser. The terms of the proposed sale in the written contract included the obligation of the purchaser to make an initial payment and thereafter to continue paying for the car in instalments. The parties varied this term by oral agreement when the purchaser did not make this initial payment in full by allowing him to make this initial payment in instalments. The car was involved in an accident and judgment was obtained against the driver of the car who was the purchaser. The insurance company disputed liability for the claim against them to honour the judgment obtained as they argued that the seller of the car no longer had any insured interest with the proposed sale of the car and as such, the insurance policy has lapsed.

Azmi C.J. in this case held:

“It is therefore quite clear in my view from the evidence, that the company intended to retain the property in the car until Abdul Karim [the purchaser] has paid in full the initial payment of $1,000 under the D.6 [the contract] when he could execute a hire-purchase agreement with a financial company. ...

For the above reason, I would therefore with respect, agree with the finding of the trial judge that the appellants [seller] had an insurable interest in the car on the date of the accident and the car was being driven by Abdul Karim with the permission of the insured.” [68]

In People’s Insurance Co. of Malaya Ltd. v Ho Ah Kum & Anor, [69] the driver of a van was sued by the estate of a deceased who was killed in an accident due to the negligent driving of this driver. The estate of the deceased obtained judgment against the driver of the van. The driver, it was alleged, was driving the van with the permission of the owner of the van who had an insurance policy on the van. The question that arose in this case was whether the driver was so driving with the permission of the owner or whether the owner of the van had sold the van to the driver and as such parted with possession of the van before the date of the accident.

The driver was actually an employee of the owner of the van who at the time of the accident was using returning from a delivery made on behalf of the employer in the course of his employment. The evidence showed that the owner told the driver that the ownership of the van would not be transferred unless and until the driver made full payment of the purchase price. The owner was aware that the reason the driver bought the van was to use the van in making these deliveries.

Wee Chong Jin C.J. in this case held on the facts that:

“In any event, having regard to the relationship between Foo [driver] and Yeo [owner] throughout the material times; to the purpose for which Foo agreed to purchase from Yeo the motor van; and most important of all to the uncontradicted evidence of Foo that when the accident occurred he was returning after delivering Yeo’s flour and there being no evidence to the contrary, I take the view that there is sufficient evidence on the record for me to find and I do find that at the time of the accident Foo was driving the van on the order of the insured.” [70]

In Tattersall v. Drysdale, [71] the driver of a car was involved in an accident and judgment was obtained against him. The driver had an insurance policy with the London & Edinburgh Insurance Company for a Standard Swallow Saloon car. This Standard car was sold to a company who was in turn selling the driver a Riley Saloon car belonging to the director of this company which was under a Lloyd’s Eclipse insurance Policy. The driver was in the process of having his insurance company, the London & Edinburgh Insurance Company, cover the Riley car and no longer cover the Standard car. However, this change was not made before the accident as yet. The question that arose was which insurance company was liable for the accident.

Goddard J. in this case held :

“As to the question of permission, I am clearly of opinion that he was driving with Gilling’s [the director of the company the Riley car was bought from] permission. ... The truth is that no bargain about insurance was ever made. Gilling, on handing over his car after the bargain had been made, wished the plaintiff [driver] to insure it and he was willing to do so, but he was allowed to drive it as he wished ...” [72]

Both insurance policies contained a clause that coverage is extended to indemnify a person driving the insured car with the assured’s permission provided that the driver is not entitled to indemnity under any other insurance policy. The next question that arose, as such, was whether the Riley car was covered by the insurance policy of the driver. The judge held that it did not. This insurance policy was stated to cover the Standard car which had been sold. The Riley car was not entered on this policy. The coverage was extended to the situation when the assured drove another car temporarily but it is the car stated in the policy which is the subject of the insurance. As such, this insurance policy in the name of the driver lapsed when the car the insurance policy was stated to cover, namely the Standard car, was sold.

The driver held to be driving the Riley car with the permission of the assured, namely the director of the company who owned this car with an insurance policy, the judge went on to direct that the insurance company of the director, namely, the Lloyd’s Eclipse insurance Policy, through the extension clause discussed above, covered the driver of the Riley car and as such, was liable on the judgment obtained for the accident.

In Roslan bin Abdullah v. New Zealand Insurance Co. Ltd, [73] there was a collision between 2 trucks. Judgment was obtained and the appellant then sought to claim against the insurance company who had issued an insurance policy on the respondent’s truck. The insurance company disputed liability as the judgment obtained was not entered against the assured as the assured was the previous owner of the truck and not the current owner, the respondent company.

Wan Suleiman F.J. [74] in this case, with regard to whether there was any assignment or novation of the insurance policy from the previous owner to the new owner, affirmed the following principles from the judgment of Goddard J. in Peters v General Accident Fire & Life Assurance Corporation Ltd. [75]

Goddard J. (as he then was) held:

(a) when the vendor sold the car, the insurance policy automatically lapsed.

(b) at the time of the accident, the purchaser could not be said to be driving the car by the order or with the permission of the vendor, as the car was then the purchaser’s property.

(c) the insured is not entitled to assign his policy to a third party. An insurance policy is a contract of personal indemnity, and the insurer cannot be compelled to accept responsibility in respect of a third party who may be quite unknown to them.” [76]

Wan Suleiman F.J., with regard to whether the driver, as an employee of the current owner of the truck was driving with the permission of the previous owner of the truck, held :

“We are informed by counsel for the appellant that Wee & Wee Realty Sdn. Bhd. [the previous owner of the truck] and United Malaysia Co. Ltd. [the current owner of the truck] the second defendant in C.S. K.124/76 are sister companies. Be that as it may they are distinct entities. The respondents were no longer the owners of the truck and therefore there cannot be any question of them ordering or permitting the first defendant [employee of the current owner of the truck] in C.S. K.124/76 to drive it.” [77]

S. Santhana Dass writes :

“Life insurance seeks to reduce the financial uncertainties arising from the natural contingencies in old age and death and to ease the burden in the case of possible misfortunes - injury and sickness. The principal function of life insurance business is to furnish protection against the financial needs which may be caused by disability and death. It provides food, shelter and clothing, when illness, injury or death cuts off the income of the breadwinner.” [78]

In the book, Colinvaux’s Law of Insurance , it is written:

“Life policies are to be considered something more than a contract. They are treated as securities for money payable at an uncertain but future date which is bound to occur.” [79]

Robert J. Surridge, Sara Forrest, Noleen Dignan, Alison Broadberry & Duncan Backus writes :

“A practical definition might be that a life assurance contract is one whereby one party (the insurer) undertakes for a consideration (the premium) to pay money (the sum assured) to or for the benefit of the other party (the assured) upon the happening of a specified event, where the object of the assured is to provide a sum for himself or others at some future date, or for others in the event of his death.” [80]

Robert J. Surridge, Sara Forrest, Noleen Dignan, Alison Broadberry & Duncan Backus also write with regard to the assignment of life policies that :

“An assignment of a life policy is a document or action which is effective to transfer the ownership of the policy from one person to another. Assignments may be made for a variety of reasons, including:

- Sale of exchange;

- Gift or voluntary transfer;

- Settlement, transferring the policy to trustees to give effect to successive or contingent interests;

- Transfer to existing trustees of a settlement or to beneficiaries in pursuance of the trusts;

- Mortgage; transfer of mortgage; or reassignment on repayment;or

- Assignment to a trustee for the benefit of creditors.” [81]

Nik Ramlah Mahmood writes:

“In relation to life insurance, an assignment means the transfer of one’s interest in the policy to another. Such an assignment commonly happens when an insured under an own life policy uses the policy, which is a valuable piece of property, as security for a loan and assigns it to the creditor. This usually takes the form of a conditional assignment whereby the policy would be reassigned to the insured once he has paid all his debts. Banks and other credit-giving institutions which lend huge sums of money to individuals normally insist that the borrower takes out a policy on his life and assigns it to them as security for the loan.

A life policy can also be unconditionally or absolutely assigned either as a gift or under a contract of sale. Such an assignment is absolute and does not leave any residual rights with the assignor.” [82]

In Dalby v. The India and London Life-Assurance Company, [83] the Anchor Life-Assurance Company insured the life of his late Royal Highness, the Duke of Cambridge. This policy was effected by Wright on behalf of the company.

Parke B. stated in this case:

“The contract commonly called life-assurance, when properly considered, is a mere contract to pay a certain sum of money on the death of a person, in consideration of the due payment of a certain annuity for his life, - the amount of the annuity being calculated, in the first instance, according to the probable duration of the life; and when once fixed, it is constant and invariable. The stipulated amount of annuity is to be uniformly paid on one side, and the sum to be paid in the event of death is always (except when bonuses have been given by prosperous offices) the same, on the other. This species of insurance in no way resembles a contract of indemnity.

Policies of assurance against fire ands against marine risks, are both properly contracts of indemnity, - the insurer engaging to make good, within certain limited amounts, the losses sustained by the assured in their buildings, ships, and effects... [84]

... a contract of indemnity only. But that is not of the nature of what is termed an assurance for life; it really is what it is on the fact of it, - a contract to pay a certain sum in the event of death [85] .”

S. Santhana Dass points out that:

“An assignee under a life insurance contract can re-assign the policy to the original owner.” [86]

The Policies of Assurance Act 1867 [87] defines a life insurance policy as “... ‘any instrument by which the payment of moneys, by or out of the funds of an assurance company, on the happening of any contingency depending on the duration of human life, is assured or secured’. [88] ”

The Policies of Assurance Act 1867 provides that an assignee can sue in his own name if [89] :

(i) the assignee has the right in equity to receive and the right to give a valid discharge to the assurance company for the policy money, that is, it was a precondition that the assignee be beneficially entitled to the policy money or entitled to receive the policy money as a trustee or mortgagee at the time of the claim;

(ii) the assignee has obtained an assignment, either by endorsement on the policy or by separate instrument, in the words or to the effect set forth in the Schedule to this Act; and

(iii) written notice of the assignment had been given to the insurance company.

Cotton L.J. in the case In re Turcan [90] commented :

“Before the Act of 1867 [91] (30 & 31 Vict. C. 144) a policy could not be assigned at law, but now it can ...” [92]

Section 4(3) of the Civil Law Act 1956 [93] states :

“Any absolute assignment, by writing, under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, shall be, and be deemed to have been, effectual in law, subject to all equities which would have been entitled to priority over the right of the assignee under the law as it existed in the State before the date of the coming into force of this Act [94] , to pass and transfer the legal right to the debt or chose in action, from the date of the notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor.”

S. Santhana Dass has summarised the requirements under section 4(3) of the Civil Law Act 1956 in order to effect a legal assignment of a life insurance policy as follows :

“The requirements for an absolute assignment of a life policy are as follows:-

(a) the assignment must be in writing and signed by the assignor (the insured);

(b) it must be absolute and not by way of charge only; and

(c) notice in writing of the assignment must be given to the insurer.” [95]

S. Santhana Dass goes on to explain:

“The common practice amongst insurers with respect to assignments (be it under the Section 4(3) of the Civil Law Act 1956 or the Policies of Assurance Act 1867 (U.K.) can be summarised as follows:-

(i) An assignment should be in writing and a life policy can be assigned absolutely or conditionally.

(ii) The written notice of assignment must be sent to the Head Office or the Principal Office of the insurer.

(iii) Upon receipt of the assignment notice the insurer registers each notice.

(iv) If there is no written notice given to the insurer and the insurer has made payment to a person other than the assignee, the insurers shall not be liable to the assignee thereafter. The assignee cannot sue the insurer for recovery of any benefit under the policy unless a notice of assignment has been sent to the insurer.

(v) An assignment can be done by effecting an endorsement and attaching it to the back of the policy. Otherwise it is effected by a separate deed signed by all parties concerned i.e. the assignor, assignee and the insurer.

(vi) If there is more than one assignment, the priority of claims by the assignor will depend upon the priority in the date of receipt of the notice by the insurer. Thus position has now been altered by Section 168(2) of the Insurance Act 1996 where priority is based on the date of the assignment rather than date of the notice.” [96]

Robert J. Surridge, Sara Forrest, Noleen Dignan, Alison Broadberry & Duncan Backus writes:

“Where there has not been a legal assignment but the assignee has given consideration , equity will (subject to the riles on priority) assist him to perfect his title against third parties, even though he may not have obtained formal assignment.

If, however, a voluntary assignee seeks the support of equity, he will succeed only where:

(1) the assignment is complete between assignor and assignee, ie everything necessary has been done to make a present transfer and render the assignment binding; or

(2) the assignor has constituted himself as trustee for the assignee.” [97]

Roy Hodgin writes :

“Assignment can be made in equity ... commonly, under the Policies of Assurance Act 1867, which requires that notice of such assignment be given in writing to the insurer. Under the 1867 Act, the assignment may be made either by an endorsement on the policy or by a separate document using the wording set out in the Schedule to the Act.” [98]

Cohen L.J. in Inland Revenue Commissioners v. Electric and Musical Industries, Ltd. [99] explained :

“It is quite true that as a matter of law there is no special form required to constitute an equitable assignment. Whether or not what has been done in any particular transaction amounts to an equitable assignment is a matter of inference from the facts and documents concerned ...” [100]

“There is no specific method of effecting an equitable assignment of a life policy. The only important requirement is that there must be a clear indication that the object of the transaction is to transfer the benefits in the policy from one party to another. No written document is necessary. A common way of effecting an equitable assignment is by the assignor depositing the policy of insurance with the assignee. An equitable assignee cannot enforce his rights directly against the insurer in his own name, he must either compel the assignor to sue on his behalf or sue the assignor and join the insurer to the action. The equitable assignee is thus not in a position to give a legal disharge to the insurer.” [101]

Tan Lee Meng writes:

“For the assignor to claim under the policy, the assignment must be complete.” [102]

In the case In re Williams [103] , an owner of an insurance policy paid the insurance premiums until his death. The court had to construe a purported assignment of the policy to his housekeeper through the following signed endorsement:

“’I authorise Ada Maud Ball, my housekeeper and no other person to draw this insurance in the event of my predeceasing her this being my sole desire and intention at time of taking this policy out and this is my signature.’” [104]

Lord Cozens-Hardy M.R. held:

“According to my construction it is not an assignment at all. The question whether in the circumstances there is a voluntary gift always involves the consideration not whether the donor might have given the property, but what is the form in which he has purported to give it. Take the case of shares in a limited company which are only transferable by deed, or the case of Consols which are only transferable at the Bank of England; it is quite clear that a mere letter not under seal in either of these cases purporting to assign the property would not have been complete, the donor would not have done all he could to perfect it, and the intended gift would have failed. Of course if there had been valuable consideration for the assignment the position would have been different.” [105]

Warrington L.J. in this case agreed:

“The assignee in the present case is a volunteer, and she claims to have received in the assignor’s lifetime the gift of a certain chose in action, namely, a policy of insurance, the amount secured by which is in its nature only to be paid on the death of the assured. It is a policy on the assignor’s own life. Claiming as she does as a volunteer and alleging that the assignor made this gift to her, she can only succeed if she can show that the assignor did everything which according to the nature of the property comprised in the assignment was necessary to be done in order to transfer the property and render the assignment binding upon him. ...

The question turns largely if not entirely on the construction of the document. Of course the mere form of words is immaterial if the assignor has used any form of words which expressed a final and settled intention to transfer the property to the assignee there and then. That would be sufficient. He need not use the word “give” or “assign” or any particular words.” [106]

Warrington L.J. construed the words of the endorsement and came to the conclusion that it merely created a revocable authority to receive the policy money after the assignor’s death which was a nullity as the authority would be revoked by the assignor’s death [107] . Lord Cozens-Hardy M.R. similarly construed the endorsement as either a mere: [108]

• power of attorney, though not under seal, authorising the person named to receive the money which power becomes inoperative on the death of the person conferring it; or

• mandate which ceased to be operative at death.

In Newman v. Newman, [109] section 3 of the Policies of Assurance Act 1867 was construed. This section states:

“No assignment made after the passing of this Act of a policy of life assurance shall confer on the assignee therein named, his executors, administrators, or assigns, any right to sue for the amount of such policy, or the moneys assured or secured thereby, until a written notice of the date and purport of such assignment has been given to the assurance company liable under such policy at its principal place of business for the time being; and the date on which such notice was received shall regulate the priority of all claims under any assignment; and a payment bona fide made in respect of any policy by any assurance company before the date on which such notice was received shall be as valid against the assignee giving such notice as if this Act had not been passed.” [110]

North J. in this case interpreted this section in the following manner:

“That Act was passed in order to avoid the necessity of joining the assignor of the policy in actions against the insurance office, and it provides that if a certain notice is given to the office then the assignee may sue without joining the assignor. Then these words occur ‘And the date on which such notice shall be received shall regulate the priority of all claims under any assignment.’ It was contended that these words went much further than was necessary for the protection of the insurance office, and affected the rights of the parties inter se . ... In my opinion that is not the meaning of the statute, which was not intended to give a simpler remedy against an insurance office, and also to give facilities to insurance offices in settling claims by enabling them to recognise as the first claim the claim of the person who first gave such notice as required by the statute. It was not intended in my opinion to enact that a person who had advanced money upon a second charge without notice of the first, and made subject to it, should be giving statutory notice of the office exclude the person who had the prior incumbrance.” [111]

In Spencer v. Clarke [112] , a life insurance policy was used as security for two separate loans from separate parties. The contention was then which party had priority in terms of the security.

Hall, V.C. held:

“I am of the opinion that as between the Plaintiffs [the second creditor] in this action and the Defendant Tranter [the first creditor], the Defendant Tranter is entitled to priority as to the policy in the Westminster and General Life Assurance Association . That policy was deposited with him by way of equitable security. He is first in point of time, and therefore first as regards his security.” [113]

The first creditor then contended that he obtained priority by giving notice to the insurance office of his claim first in accordance with the Policies of Assurance Act 1867 . However, Hall V.C. held on this point that :

“In order to bring the case within the statute, there must, according to the plain words of the statute and the explanatory form of assignment given in the schedule, be an assignment, and an agreement to assign upon request is not an assignment.” [11]

“In essence, whether there has been a valid assignment under the provisions of the Policies of Assurance Act or section 4(6) of the Civil Law Act, all claims to priority amongst the assignees and encumbrances of a policy are dealt with on the basis that all claimants are equitable assignees so long as the proceeds of a policy are with the insurers or have been paid into court. The priority of equitable assignment is dependent on the date of assignment and the fact that there has been notice of prior equities does not affect the position. However, if X is an equitable assignee for value and Y is the holder of a prior equity, X can claim priority over Y if he has no actual or constructive notice of the earlier assignment and if he has given formal notice to the insurers of the assignment before the insurers have come to know of Y’s interest or if X has been misled by Y into taking the assignment or if Y has by his negligence contributed to the creation of the assignment to X.” [115]

Robert M. Merkin writes with regard to priorities of assignments:

“... a number of basic principles may be stated. First, the general equitable rule is that assignments rank in priority in order of their date of creation, but this is subject to the further rule that, where one or more assignees have given notice to the insurer, priority is determined by the date of notice. Secondly, the giving of notice to the insurer will obtain priority only for an assignee, whether legal or equitable, who was unaware of earlier assignments at the date of his own assignment. Knowledge for these purposes may be actual or constructive; the fact, for example, that the assured cannot deposit the policy with the assignee has been held [116] to put him on notice that it may have been deposited by way of assignment earlier. ... Thirdly, it is possible to have a legal assignment only by the giving of notice to the insurer.” [117]

S. Santhana Dass points out that :

“This common law position has been altered by Section 168(2) of the Insurance Act 1996 ... Notice of assignment to the insurers are no more relevant for the purpose of determining priority which puts the insurer in a more difficult position. Do they have to ensure that there are no prior assignment before paying to an assignee? It would be impractical to impose such a duty on the insurers because they would have no means of getting such information. As long as they pay to the assignee, whose assignment they had notice, they would be free of liability in respect of any claim, provided they have no knowledge of any earlier assignment. It may be prudent for insurers to include in their standard assignment form, a declaration by the insured that he has not created any prior assignment in respect of the policy at the time of execution of the assignment.” [118]

Section 168(2) of the Malaysian Insurance Act 1996 [119] provides :

“Where more than one person are entitled under the security or the assignment, the respective rights of the persons entitled under the security or the assignment shall be in the order of priority according to the priority of the date on which the security or the assignment was created, both security and assignment being treated as one class for this purpose.”

7.1 Assignment of Insurance Policies

Francis Tierney and Paul Braithwaite writes:

“An insurance policy is a contract under which the insured has defined rights and obligations. An assignment of an insurance policy may be defined as follows:

An assignment of an insurance policy by an insured is the transfer of the rights and obligations of the insured under the policy to another who then becomes the insured in place of the original insured.” [120]

Ray Hodgin writes:

“Assignment of insurance policies has an important role in commercial life. A common example is where a mortgagee requires the mortgagor to effect a life policy to cover the extent of the loan should the mortgagor die before the loan is repaid. The policy is then assigned to the mortgagee [121] .”

Roy Hodgin points out the “... desire of the courts to make the policy assignable and therefore as flexible as possible ...” [122] In order to illustrate this point, this author discusses the United States case of Grigsby v Russell [123] where a life policy was taken out by someone on his own life. This person paid two premiums and no more as he required the money for medical care. This person assigned the policy to someone else for value and the assignee continued to pay the premiums. Upon the assignor’s death, the question that arose was whether the insurance company should pay the proceeds to the assignor’s estate or the assignee. The Supreme Court of the United Stated held that the proceeds should be paid to the assignee. Mr. Justice Holmes in this case commented:

“Of course, the ground suggested for denying the validity of an assignment for a person having no interest in the life insured is the public policy that refuses to allow insurance to be taken out by such persons in the first place ... the ground for the objection to life insurance without interest in the earlier English cases was not the temptation to murder but the fact that such wagers came to be regarded as a mischievous kind of gaming ... On the other hand, life insurance has become in our days one of the best recognised forms of investment and self-compelled savings. So far as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property ... To deny the right to sell except to persons having such an interest is to diminish appreciably the value of the contract in the owner’s hands.”

This indication of the attitude of the American courts as quoted by an English writer is noteworthy. However, in Malaysia, the courts are bound by the beneficiary of a life policy proving that he/she has an insurable interest in the life insured under section 152 of the Insurance Act 1996. [124]

“For a valid assignment of personal contracts such as contracts of fire insurance and liability insurance, the insurer’s consent is required... [125]

To be valid, an assignment by the insured of a non-life policy must be contemporaneous with an assignment of the subject matter of insurance to the assignee. The insured will not be in a position to assign the policy at a later date as he will no longer have an insurable interest in the property, in respect of which the policy was issued [126] . ...

An assignor of a life policy, which is a valuable chose in action, may effect a legal assignment of his policy by virtue of the provisions of the Policies of Assurance Act [127] , which only concerns the assignment of life policies, or by virtue of the provisions of section 4(6) of the Civil Law Act [128] , which concerns the assignment of all choses in action including life policies [129] .”

S. Santhana Dass writes:

“’Choses in action’ or ‘things in action’ are assignable.

Assignment of chose in action take places when the liabilities imposed or the rights acquired under a contract between A and B are transferred to C who is not a party to the original contract.

The expression ‘chose in action’ or ‘thing in action’, in the literal sense, means a thing recoverable by suit or action in law. ...

Rights under a contract of insurance are choses in action.” [130]

As such, it would seem that with regard to property and motor insurance, the assignment or sale of the subject matter of the insurance is insufficient to transfer the insurance policy as well. The insurance company’s consent is required before the policy will change hands. In order for the insured or original policy holder to effect a valid assignment, the insurance company’s consent and resulting assignment of the insurance policy must be contemporaneous with the assignment or sale of the subject matter since once the assignment or sale of the subject matter is complete, the insured no longer has any insurable interest in the subject matter of the insurance and as such, no more insurable interest in the policy to assign.

Nik Ramlah Mahmood explains:

“The contract of insurance itself can only be assigned with the consent of the insurer. This amounts to the substitution of a new contract for the old - a novation - and is allowed under the Contracts Act 1950 [131] . Novation results in the formation of a new contract between the insurer and the assignee and the latter is subject to all the terms and conditions of the new contract and he effectively replaces the assignor as the insured under the policy.” [132]

The assignment of life insurance policies may be effected by the insured through a legal assignment, either under the Policies of Assurance Act 1867 [133] or section 4(3) of the Civil Law Act 1956 .

7.2 Assignment of the Proceeds of Insurance Policies

“The proceeds of a policy may be assigned either in equity or at law in accordance with the provisions of section 4(6) of the Civil Law Act [134] . The insured’s right to the proceeds of a policy is a valuable chose in action and it may be assigned either before or after the occurrence of a loss. For an assignment of the proceeds of a policy, which is distinct from an assignment of the contract or policy of insurance, the consent of the insurer is not required.”

In the case of an equitable assignment of the proceeds of the policy, an action to recover the said proceeds must be brought in the name of the insured.

Where the assignor has effected a legal assignment of the proceeds of the policy in accordance with the requirements of section 4(6) of the Civil Law Act, the assignee may sue in his own name. The assignment must be an absolute assignment in writing under the assignor’s hand and express notice of such assignment must be given in writing to the insurers.

The assignee of the proceeds of the policy cannot acquire rights which are superior to those of the assignor. It follows that all the defences which could have been raised by the insurer against the assignor are equally applicable against the assignee. Thus, the insurers may avoid liability on account of the assignor’s misrepresentation or non-disclosure. Furthermore, all terms which are conditions precedent to the insurer’s liability must be complied with and the insurer may avoid liability to the assignee of the proceeds of a policy on the ground of the assignor’s failure to comply with a condition precedent. For instance, in Re Carr & Sun Fire Insurance Co., [135] the insured’s failure to provide the insurer with proof of loss within the time stipulated under the terms of the policy precluded the trustee in bankruptcy from recovering the proceeds of the policy.” [136]

7.3 Assignment of the Subject Matter of Insurance Policies

E. R. Hardy Ivamy writes:

“Before the assignee of the subject-matter can in his own name enforce the contract contained in the policy, it is necessary that the policy should be validly assigned to him... [137]

On the completion of the assignment, the rights and duties of the original assured devolve on the assignee, who becomes, to all intents and purposes, the assured under the policy which he may accordingly enforce in his own name [138] .”

“The question of an assignment of the subject matter of insurance arises when the insured property has been sold or otherwise disposed of by the insured. It does not arise in the case of life and personal accident policies because the subject matter of such policies is unassignable.

An insured who has voluntarily and completely given up his interest in the subject matter of the insurance ceases to have an insurable interest in the insured property. Such an insured can no longer make a claim under the policy with respect to the property which has been given up as he will not be in a position to suffer any loss with regard to the property.” [139]

7.4 Assignment by Operation of Law

The case of Thomas v. National Farmer’s Union Mutual Insurance Society Ltd. [140] involved the property in hay and straw on a farm being passed from a tenant to a landlord by virtue of the Agricultural Holdings Act 1948 when the landlord served a notice to quit on his tenant. Diplock J. in this case explained:

“Where property passes automatically as the result of statutory provisions when certain circumstances arise, it seems to me that this is a passing of property by operation of law.” [141]

“The insured’s interest in the policy or in the subject matter of interest may be assigned by operation of law. For instance, such an assignment will occur in the event of the death or bankruptcy of the insured.

As far as the insured’s interest in the insured property is concerned, such interest vests in the insured’s personal representative in the event of the insured’s death. On the other hand, in the event of the bankruptcy of the insured, the insured’s interest in the insured property vests in the Official Assignee. In either of these situations, the continued effectiveness of the policy is not in doubt.

Where a loss occurs before an assignment by operation of law, the insured’s personal representatives or trustee in bankruptcy, as the case may be, has the right to claim against the insurers. The position is more complicated where a loss occurs after an assignment by operation of law and after the property has been distributed to those who are entitled to the same. Most policies avoid such complications by providing that the insurer shall indemnify the insured and all other persons to whom his interest in the insured property may pass by means of a will or by operation of law.” [142]

Myint Soe writes :

“The general principle is that on death and bankruptcy, both the subject matter insured and the policy itself pass to the personal representatives or the Official Assignee, as the case may be.

However, the personal representatives or the Official Assignee cannot have a better title than the deceased or the bankrupt. The claim would be liable to be defeated by any non-disclosure or misrepresentation or breach of condition on the part of the insured before the assignment takes effect.” [143]

“Any person who takes an insurance policy should find out whether there is any special clause prohibiting or restricting assignment. Some policies may prohibit the assignment of the subject matter during the currency of the policy. Some policies may prohibit assignment otherwise than by will or operation of law.” [144]

Kenneth Sutton writes :

“A policy of insurance is or evidences a contract and is therefore, like any other agreement, subject to the general law of contract as developed by the common law and modified by statute. In addition, special rules have been developed in relation to insurance contracts. Thus, they are the most common example of that special class of contract known as contracts uberrimae fidei, that is, of utmost good faith, and hence there are special rules in relation to non-disclosure, misrepresentation and the like in respect of them.” [145]

The legal standing of assignments in the field of insurance, thus, is not a straightforward question to answer. It depends on what is being assigned and how assignments are conducted in the various branches of insurance law.

In practical terms, insurance companies themselves may not be certain of the legal stand of various claimants who clamour at their doors demanding payment on insurance claims arising out of purported assignments. Insurance companies, therefore, may demand these eager voices to prove the validity of their claims in court. The insurance company then, will make payment on the claims as directed by the superior wisdom and authority of the court of law. As Irwin M. Taylor writes:

“Insurance companies are frequently presented with conflicting claims advanced by the original beneficiary and a subsequently designated beneficiary or assignee. Rather than pay to either one at its peril, it is the practice of insurance companies to bring both claimants into a law suit, deposit the money into court and leave the two claimants to fight the matter out themselves.” [146]

A. Vijayalakshmi Venugopal*

[*] Advocate & Solicitor

High Court of Malaya

[1] A. A. Tarr, Kwai-Lian Liew & W. Holligan, Australian Insurance Law , Second Edition, The Law Book Company Limited, 1991, at page 1.

[2] Namely marine, life and fire insurance.

[3] John Lowry & Philip Rawlings, Insurance Law: Doctrines and Principles , Hart Publishing (U.S.A), 1999, at page 3.

[4] Professor K. S. N. Murthy & K. V. S. Sarma, Modern Law of Insurance in India , N. M. Tripathi Private Limited (Bombay, India), 1995, at page 3.

[5] John Birds & Norma J. Hird, Birds’ Modern Insurance Law , Fifth Edition, Sweet & Maxwell (London), 2001, at page 13.

[6] (1881) 18 Ch.D 1.

[7] Ibid 9-10.

[8] Principles of Insurance Law , Fifth Edition, Butterworths Asia, 2000, at page 1193.

[9] R. C. Kohli, An Introduction to Insurance Practice and Principles in Singapore and Malaysia, Singapore Insurance Training Centre, 1982, at page 77.

[10] William Brandt’s Sons & Co. v. Dunlop Rubber Co. (1905) A.C. 454 (House of Lords) per Lord Macnaghten, at page 462.

[11] David Norwood & John P. Weir, Norwood on Life Insurance Law in Canada , Second Edition, Carswell Thomson Professional Publishing, 1993, at page 258.

[12] Malcolm A. Clarke, The Law of Insurance Contracts , Second Edition, Lloyd’s of London Press Ltd, 1994, at page 170.

[13] Act 553.

[14] Act 67 (revised 1972).

[15] This Act is declared to come into force on 7 April 1956.

[16] 30 and 31 Victoria, chapter 144.

[17] 15 and 16 Geo. V., chapter 20.

[18] A ‘chose in action’ has been defined by Erin Goh, Valerie Low and Low Kee Yang (editor) in Butterworths Law for Business Series - Insurance Law , Butterworths Asia, 2001, at page 191 in the following manner, “A chose in action is the right to demand payment of a sum of money or to recover damages under a contract.”

[19] Nik Ramlah Mahmood, Insurance Law in Malaysia , Butterworths, 1992, at pages 207-208.

[20] [1984] 1 MLJ 260 (Federal Court).

[21] Quoted and discussed above.

[22] [1984] 1 MLJ 260 (Federal Court), at page 264.

[23] 6 Edw 7, c. 41 (United Kingdom).

[24] Halsbury’s Statutes of England and Wales, Fourth Edition, Volume 22, 2000 Reissue, Butterworths (London), 2000, at page 42.

[25] Ibid 43.

[26] Robert Merkin (Editor), Colinvaux’s Law of Insurance , Sixth Edition, Sweet & Maxwell (London), 1990, at pages 405-406.

[27] Halsbury’s Statutes of England and Wales, Fourth Edition, Volume 22, 2000 Reissue, Butterworths (London), 2000, at page 25.

[28] Michael Parkington, Nicholas Leigh-Jones, Andrew Longmore & John Birds (Editors), Macgillivray & Parkington on Insurance Law - relating to all risks other than marine, Eighth Edition, Sweet & Maxwell (London), 1988, at pages 714-715.

[29] The cases quoted in support of this proposition in this book, at page 714 are Rayner v. Preston (1881) 18 Ch. D. 1, at page 7 per Cotton L,J, Ecclesiastical Commissioners v. Royal Exchange Assurance Corporation (1895) 11 TLR 476, Robson v. Liverpool, London and Globe Insurance Co. (1900) The Times, June 23, Rogerson v. Scottish Automobile and General Insurance Co. Ltd. (1931) 48 TLR 17, Tattersall v. Drysdale [1935] 2 K.B. 174 and Boss and Hansford v. Kingston [1962] 2 Lloyd’s Rep. 431.

[30] The case quoted in support of this proposition, at page 714 of this book is Forbes & Co. v. Border Counties Fire Office (1873) 11 Macph. 278.

[31] The case quoted in support of this proposition in this book, at page 714 is Collingridge v. Royal Exchange Assurance Corporation (1877) 3 QBD 173.

[32] The cases quoted in support of this proposition in this book, at page 715 are Castellain v. Preston (1883) 11 QBD 380, at page 385 per Brett L.J. and A.R. Williams Machinery Co. v. British Crown Assurance Corporation Ltd . (1921) BCR 481.

[33] The case quoted in support of this proposition in this book, at page 715 is the judgment of Bowen L.J. in Castellain v. Preston (1883) 11 Q.B.D. 380, at pages 401 and 405. This author also comments that once the vendor is fully paid, however, his interest will cease and he will be unable to recover as was held in Bank of New South Wales v. North British and Mercantile Insurance Co. (1881) 2 NSWLR 239.

[34] Digby C. Jess, The Insurance of Commercial Risks Law and Practice , Second Edition, Butterworths (London), 1993, at page 15.

[35] (1875) LR 10 QB 249.

[36] (1875) LR 10 QB 249, at page 253.

[37] (1743) 1 Wils. KB 10; 95 ER 463.

[38] (1743) 1 Wils. KB 10, at page 10; 95 ER 463, at page 463.

[39] (1895) 11 TLR 476 (High Court).

[40] Id 476.

[41] (1877) 3 QBD 173.

[42] Ibid 176-177.

[43] Ibid 177.

[44] (1881) 18 Ch.D 1.

[45] Ibid 6.

[46] Ibid 6-7.

[47] (1881) 18 Ch.D 1, at page 11.

[48] Ibid 12.

[49] Ibid 16.

[50] (1883) 11 QBD 380 (Court of Appeal).

[51] (1883) 11 QBD 380 (Court of Appeal), at page 386.

[52] Ibid 393.

[53] Ibid 396-397.

[54] Mahinder Singh Sidhu, Casebook on Motor Insurance Law in Malaysia and Singapore - with synopsis and principles, International Law Book Services, 1995, at page 25.

[55] Ibid 31.

[56] [1938] 2 All ER 267 (Court of Appeal).

[57] Ibid 269.

[58] Ibid 269-270.

[59] Ibid 270.

[60] The equivalent Act in Malaysia is the Road Transport Act 1987 (Act 333).

[61] Refer to section 35 of the United Kingdom Act and section 90 of the Malaysian Act.

[62] Refer to section 10 of the United Kingdom Act and section 91 of the Malaysian Act.

[63] Who was the seller of the car.

[64] [1938] 2 All ER 267 (Court of Appeal), at pages 270-271.

[65] [1963] 2 Lloyd’s Rep. 439 (High Court).

[66] [1963] 2 Lloyd’s Rep. 439 (High Court), at page 440.

[67] [1967] 1 MLJ 94 (Federal Court).

[68] Ibid 96.

[69] [1967] 2 MLJ 134 (Federal Court).

[70] Ibid 136.

[71] [1935] 2 KB 174.

[72] Ibid 178.

[73] [1981] 2 MLJ 324 (Federal Court).

[74] This judgment was delivered by Lee Hun Hoe C.J. (Borneo).

[75] [1937] 4 All ER 628 (High Court). Discussed above is the Court of Appeal judgment.

[76] [1981] 2 MLJ 324 (Federal Court), at page 325.

[77] Ibid 325.

[78] S. Santhana Dass, Law of Life Insurance in Malaysia , Alpha Sigma Sdn Bhd, 2000, at page 1.

[79] Robert Merkin (Editor), Colinvaux’s Law of Insurance, Sixth Edition, Sweet & Maxwell (London), 1990, at page 178.

[80] Robert J. Surridge, Sara Forrest, Noleen Dignan, Alison Broadberry & Duncan Backus, Houseman and Davies Law of Life Assurance , Eleventh Edition, Butterworths (London), 1994, at page 1.

[81] Ibid 262

[82] Nik Ramlah Mahmood, Insurance Law in Malaysia , Butterworths, 1992, at page 206.

[83] (1854) 15 CB 365; 139 ER 465.

[84] Ibid page 387; 139 ER 465, at page 474.

[85] (1854) 15 C.B. 365, at page 391; 139 E.R. 465, at page 476.

[86] S. Santhana Dass, Law of Life Insurance in Malaysia , Alpha Sigma Sdn Bhd, 2000, at page 287.

[87] An Act in the United Kingdom.

[88] Robert J. Surridge, Sara Forrest, Noleen Dignan, Alison Broadberry & Duncan Backus, Houseman and Davies Law of Life Assurance , Eleventh Edition, Butterworths (London), 1994, at page 263.

[90] (1888) 40 Ch.D 5.

[91] The Policies of Assurance Act 1867.

[92] (1888) 40 Ch.D 5, at page 10.

[93] Act 56.

[94] This Act came into force in West Malaysia on 7 April 1956.

[95] S. Santhana Dass, Law of Life Insurance in Malaysia , Alpha Sigma Sdn Bhd, 2000, at page 276.

[96] Ibid 281-282.

[97] Robert J. Surridge, Sara Forrest, Noleen Dignan, Alison Broadberry & Duncan Backus, Houseman and Davies Law of Life Assurance , Eleventh Edition, Butterworths (London), 1994, at page 265.

[98] Ray Hodgin, Insurance Law - Text and Materials , Cavendish Publishing Limited (United Kingdom), 1998, at page 63.

[99] [1949] 1 All ER 120 (Court of Appeal).

[100] Ibid 126.

[101] Nik Ramlah Mahmood, Insurance Law in Malaysia , Butterworths, 1992, at pages 206-207.

[102] Tan Lee Meng, Insurance Law in Singapore , Second Edition, Butterworths Asia, 1997, at page 415.

[103] (1917) 1 Ch.D 1 (Court of Appeal).

[104] Ibid 2.

[105] Ibid 7.

[106] Ibid 8.

[107] Ibid 8.

[108] Ibid 7.

[109] (1885) 28 Ch.D 674.

[110] Poh Chu Chai, Principles of Insurance Law , Fifth Edition, Butterworths Asia, 2000, at page 1208.

[111] (1885) 28 Ch.D 674, at pages 680 and 681.

[112] (1878) 9 Ch.D 137.

[113] Ibid 140.

[114] Ibid 141.

[115] Tan Lee Meng, Insurance Law in Singapore , Second Edition, Butterworths Asia, 1997, at page 417.

[116] The authority given in this book, at page D.1.2-04, for this proposition is the case of Re Weniger’s Policy (1910) 2 Ch.D 291.

[117] Robert M. Merkin, Kluwer’s Insurance Contract Law , Croner CCH, 2000, at page D.1.2-04.

[118] S. Santhana Dass, Law of Life Insurance in Malaysia , Alpha Sigma Sdn Bhd, 2000, at page 284.

[119] Act 553.

[120] Francis Tierney & Paul Braithwaite, A Guide to Effective Insurance , Second Edition, Butterworths Canada Ltd., 1992, at page 13.

[121] Ray Hodgin, Insurance Law - Text and Materials , Cavendish Publishing Limited (United Kingdom), 1998, at page 63.

[122] Ibid .

[123] 222 US 149 (1911).

[124] Act 553.

[125] Tan Lee Meng, Insurance Law in Singapore , Second Edition, Butterworths Asia, 1997, at page 411

[126] Ibid 413.

[127] According to footnote 27, at page 413 of this book, prior to the coming into force of the English Policies of Assurance Act 1867, a life policy could only be assigned in equity and not through a legal assignment. The equitable assignee could only sue by

having the assignor of the policy joined as a party to the action.

[128] The equivalent Malaysian provision is section 4(3) of the Civil Law Act 1956

[129] Tan Lee Meng, Insurance Law in Singapore , Second Edition, Butterworths Asia, 1997, at page 413.

[130] S. Santhana Dass, Law of Life Insurance in Malaysia , Alpha Sigma Sdn Bhd, 2000, at page 274

[131] Nik Ramlah Mahmood, at page 209, in footnote number 12 clarifies that she is referring to section 63 of the Contracts Act 1950 (Act 136) in this context which states, “If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.”

[132] Nik Ramlah Mahmood, Insurance Law in Malaysia , Butterworths, 1992, at page 209.

[133] If that applies in Malaysia as discussed by Nik Ramlah Mahmood, Insurance Law in Malaysia , Butterworths, 1992, at pages 207-208.

[134] The equivalent Malaysian provision is section 4(3) of the Civil Law Act 1956 (Act 65).

[135] (1897) 13 TLR 186.

[136] Tan Lee Meng, Insurance Law in Singapore , Second Edition, Butterworths Asia, 1997, at pages 410-411

[137] E. R. Hardy Ivamy, General Principles of Insurance Law , Sixth Edition, Butterworths (London), 1993, at page 348.

[138] Ibid 353.

[139] Tan Lee Meng, Insurance Law in Singapore , Second Edition, Butterworths Asia, 1997, at page 407.

[140] [1961] 1 WLR 386.

[141] [1961] 1 WLR 386, at page 392.

[142] Tan Lee Meng, Inssurance Law in Singapore , Second Edition, Butterworths Asia, 1997, at pages 430-431.

[143] Myint Soe, The Insurance Law of Malaysia , Quins Pte. Ltd., 1979, at page 62.

[144] Ibid .

[145] Kenneth Sutton, Insurance Law in Australia , Third Edition, LBC Information Services, 1999, at pages 11-12.

Notice of assignment of insurance policies and form of acknowledgement for an assignment by way of security: single company assignor—bilateral—specific monies

Published by a lexisnexis banking & finance expert, notice of assignment.

[ To be printed on the headed notepaper of the assignor ]

To: [ insert name and address of the relevant insurer ]

Date: [ • ]

Dear [ insert organisation name ],

[ insert brief description of the relevant insurance policy ]

We refer to the assignment of insurance policies (the ‘Assignment’) dated [ • ] and granted by us as assignor (the ‘Assignor’) in favour of [ insert name of lender ] (the ‘Lender’).

We refer to the insurance policy effected by us as the policy holder, with you as the insurer relating to [ insert brief description of relevant policy and risks covered ], with policy number [ • ] and any policy that may be effected to renew, substitute or replace such insurance policy (the ‘Insurance Policy’).

We give you notice that pursuant to the terms of the Assignment, we have assigned

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The Marine Insurance Act 1906

1. MARINE INSURANCE DEFINED

A contract of marine insurance may, by its express terms, or by usage of trade, be extended so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage.

Where a ship in course of building, or the launch of a ship, or any adventure analogous to a marine adventure, is covered by a policy in the form of a marine policy, the provisions of this Act, in so far as applicable, shall apply thereto; but, except as by this section provided, nothing in this Act shall alter or affect any rule of law applicable to any contract of insurance other than a contract of marine insurance as by this Act defined.

3. MARINE ADVENTURE AND MARITIME PERILS DEFINED

Subject to the provisions of this Act, every lawful marine adventure may be the subject of a contract of marine insurance.

In particular there is a marine adventure where—

Any ship, goods or other moveables are exposed to maritime perils. Such property is in this Act referred to as "insurable property";

The earning or acquisition of any freight, passage money, commission, profit, or other pecuniary benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of insurable property to maritime perils;

Any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils.

"Maritime perils" means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the sea, fire, war perils, pirates, rovers, thieves, captures, seizures, restraints, and detainments of princes and peoples, jettisons, barratry, and any other perils, either of the like kind or which may be designated by the policy.

Insurable Interest

4. AVOIDANCE OF WAGERING OR GAMING CONTRACTS

5. INSURABLE INTEREST DEFINED

Every contract of marine insurance by way of gaming or wagering is void.

A contract of marine insurance is deemed to be a gaming or wagering contract-

Where the assured has not an insurable interest as defined by this Act, and the contract is entered into with no expectation of acquiring such an interest; or

Where the policy is made "interest or no interest", or "without further proof of interest than the policy itself", or "without benefit of salvage to the insurer", or subject to any other like term

Provided that, where there is no possibility of salvage, a policy may be effected without benefit of salvage to the insurer.

Subject to the provisions of this Act, every person has an insurable interest who is interested in a marine adventure.

In particular a person is interested in a marine adventure where he stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or damage thereto, or by the detention thereof, or may incur liability in respect thereof.

6. WHEN INTEREST MUST ATTACH

The assured must be interested in the subject-matter insured at the time of the loss though he need not be interested when the insurance is effected:Provided that where the subject-matter is insured "lost or not lost", the assured may recover although he may not have acquired his interest until after the loss, unless at the time of effecting the contract of insurance the assured was aware of the loss, and the insurer was not.

Where the assured has no interest at the time of the loss, he cannot acquire interest by any act or election after he is aware of the loss.

7. DEFEASIBLE OR CONTINGENT INTEREST

A defeasible interest is insurable, as also is a contingent interest.

In particular, where the buyer of goods has insured them, he has an insurable interest, notwithstanding that he might, at his election, have rejected the goods, or have treated them as at the seller's risk, by reason of the latter's delay in making delivery or otherwise.

8. PARTIAL INTEREST

The insurer under a contract of marine insurance has an insurable interest in his risk, and may re-insure in respect of it.

Unless the policy otherwise provides, the original assured has no right or interest in respect of such re-insurance.

10. BOTTOMRY

Where the subject-matter insured is mortgaged, the mortgagor has an insurable interest in the full value thereof, and the mortgagee has an insurable interest in respect of any sum due or to become due under the mortgage.

A mortgagee, consignee, or other person having an interest in the subject-matter insured may insure on behalf and for the benefit of other persons interested as well as for his own benefit.

The owner of insurable property has an insurable interest in respect of the full value thereof, notwithstanding that some third person may have agreed, or be liable, to indemnify him in case of loss.

15. ASSIGNMENT OF INTEREST

Insurable Value

16. MEASURE OF INSURABLE VALUE

In insurance on ship, the insurable value is the value, at the commencement of the risk, of the ship, including her outfit, provisions and stores for the officers and crew, money advanced for seamen's wages, and other disbursements (if any) incurred to make the ship fit for the voyage or adventure contemplated by the policy, plus the charges of insurance upon the whole;The insurable value, in the case of a steamship, includes also the machinery, boilers, and coals and engine stores if owned by the assured, and, in the case of a ship engaged in a special trade, the ordinary fittings requisite for that trade;

In insurance on freight, whether paid in advance or otherwise, the insurance value is the gross amount of the freight at the risk of the assured, plus the charges of insurance;

In insurance on goods or merchandise, the insurable value is the prime cost of the property insured, plus the expenses of and incidental to shipping and the charges of insurance upon the whole;

In insurance on any other subject-matter, the insurable value is the amount at the risk of the assured when the policy attaches, plus the charges of insurance.

Disclosure And Representations

17. INSURANCE IS UBERRIMAE FIDEI

A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.

18. DISCLOSURE BY ASSURED

Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure, the insurer may avoid the contract.

Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.

In the absence of inquiry the following circumstances need not be disclosed, namely:-

Any circumstance which diminishes the risk;

Any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business, as such, ought to know;

Any circumstance as to which information is waived by the insurer;

Any circumstance which it is superfluous to disclose by reason of any express or implied warranty.

Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact.

The term "circumstance" includes any communication made to, or information received by, the assured.

19. DISCLOSURE BY AGENT EFFECTING INSURANCE

Every material circumstance which is known to himself, and an agent to insure is deemed to know every circumstance which in the ordinary course of business ought to be known by, or to have been communicated to, him; and

Every material circumstance which the assured is bound to disclose, unless it come to his knowledge too late to communicate it to the agent.

20. REPRESENTATIONS PENDING NEGOTIATION OF CONTRACT

Every material representation made by the assured or his agent to the insurer during the negotiations for the contract, and before the contract is concluded, must be true. If it be untrue the insurer may avoid the contract.

A representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.

A representation may be either a representation as to a matter of fact, or as to a matter of expectation or belief.

A representation as to matter of fact is true, if it be substantially correct, that is to say, if the difference between what is represented and what is actually correct would not be considered material by a prudent insurer.

A representation as to a matter of expectation or belief is true if it be made in good faith.

A representation may be withdrawn or corrected before the contract is concluded.

Whether a particular representation be material or not is, in each ease, a question of fact.

21. WHEN CONTRACT IS DEEMED TO BE CONCLUDED

The name of the assured, or of some person who effects the insurance on his behalf:

The subject-matter insured and the risk insured against;

The voyage, or period of time, or both , as the case may be, cover3ed by the insurance;

The sum or sums insured;

:Sub-ss (2)-(5): repealed by the Finance Act 1959, ss 30(5), (7), 37(5), Sch 8, Pt II.The name or names of the insurers.

A marine policy must be signed by or on behalf of the insurer, provided that in the case of a corporation the corporate seal may be sufficient, but nothing in this section shall be construed as requiring the subscription of a corporation to be under seal.

Where a policy is subscribed by or on behalf of two or more insurers, each subscription, unless the contrary be expressed, constitutes a distinct contract with the assured.

25. VOYAGE AND TIME POLICIES

Where the contract is to insure the subject-matter "at and from", or from one place to another or others, the policy is called a "voyage policy", and where the contract is to insure the subject-matter for a definite period of time the policy is called a "time policy". A contract for both voyage and time may be included in the same policy.

Subject to the provisions of s 11 of the Finance Act, 1901, a time policy which is made for any time exceeding 12 months is invalid.

The subject-matter insured must be designated in a marine policy with reasonable certainty.

The nature and extent of the interest of the assured in the subject-matter insured need not be specified in the policy.

Where the policy designates the subject-matter insured in general terms, it shall be construed to apply to the interest intended by the assured to be covered.

In the application of this section regard shall be had to any usage regulating the designation of the subject-matter insured.

27. VALUED POLICY

A policy may be either valued or unvalued.

A valued policy is a policy which specifies the agreed value of the subject-matter insured.

Subject to the provisions of this Act, and in the absence of fraud, the value fixed by the policy is, as between the insurer and assured, conclusive of the insurable value of the subject intended to be insured, whether the loss be total or partial.

Unless the policy otherwise provides, the value fixed by the policy is not conclusive for the purpose of determining whether there has been a constructive total loss.

28. UNVALUED POLICY

A floating policy is a policy which describes the insurance in general terms, and leaves the name of the ship or ships and other particulars to be defined by subsequent declaration.

The subsequent declaration or declarations may be made by indorsement on the policy, or in other customary manner.

Unless the policy otherwise provides, the declarations must be made in the order of dispatch or shipment. They must, in the case of goods, comprise all consignments within the terms of the policy, and the value of the goods or other property must be honestly stated, but an omission or erroneous declaration may be rectified even after loss or arrival, provided the omission or declaration was made in good faith.

Unless the policy otherwise provides, where a declaration of value is not made until after notice of loss or arrival, the policy must be treated as an unvalued policy as regards the subject-matter of that declaration.

30. CONSTRUCTION OF TERMS IN POLICY

A policy may be in the form in the First Schedule of this Act.

Subject to the provisions of this Act, and unless the context of the policy otherwise requires, the terms and expressions mentioned in the First Schedule to this Act shall be construed as having the scope and meaning in that schedule assigned to them.

31. PREMIUM TO BE ARRANGED

1. Where an insurance is effected at a premium to be arranged, and no arrangement is made, a reasonable premium is payable.

2. Where an insurance is effected on the terms that an additional premium is to be arranged in a given event, and that event happens but no arrangement is made, then a reasonable additional premium is payable.

Double Insurance

32. DOUBLE INSURANCE

1. Where two or more policies are effected by or on behalf of the assured on the same adventure and interest or any part thereof, and the sums insured exceed the indemnity allowed by this Act, the assured is said to be over-insured by double insurance.

2. Where the assured is over-insured by double insurance—

a. The assured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may think fit, provided that he is not entitled to receive any sum in excess of the indemnity allowed by this Act;

b. Where the policy under which the assured claims is a valued policy, the assured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the subject-matter insured;

c. Where the policy under which the assured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any other policy;

d. Where the assured receives any sum in excess of the indemnity allowed by this Act, he is deemed to hold such sum in trust for the insurers, according to their right of contribution among themselves.

Warranties, Etc.

33. NATURE OF WARRANTY

1. A warranty, in the following sections relating to warranties, means a promissory warranty, that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts.

2. A warranty may be express or implied.

3. A warranty, as above defined, is a condition which must be exactly complied with, whether it be material to the risk or not. If it be not so complied with, then, subject to any express provision in the policy, the insurer is discharged from liability as from the date of the breach of warranty, but without prejudice to any liability incurred by him before that date.

34. WHEN BREACH OF WARRANTY EXCUSED

1. Non-compliance with a warranty is excused when, by reason of a change of circumstances, the warranty ceases to be applicable to the circumstances of the contract, or when compliance with the warranty is rendered unlawful by any subsequent law.

2. Where a warranty is broken, the assured cannot avail himself of the defence that the breach has been remedied, and the warranty complied with, before loss.

3. A breach of warranty may be waived by the insurer.

35. EXPRESS WARRANTIES

1. An express warranty may be in any form of words from which the intention to warrant is to be inferred.

2. An express warranty must be included in, or written upon, the policy, or must be contained in some document incorporated by reference into the policy.

3. An express warranty does not exclude an implied warranty, unless it be inconsistent therewith.

36. WARRANTY OF NEUTRALITY

1. Where insurable property, whether ship or goods, is expressly warranted neutral, there is an implied condition that the property shall have a neutral character at the commencement of the risk, and that, so far as the assured can control the matter, its neutral character shall be preserved during the risk.

2. Where a ship is expressly warranted "neutral" there is also an implied condition that, so far as the assured can control the matter, she shall be properly documented, that is to say, that she shall carry the necessary papers to establish her neutrality, and that she shall not falsify or suppress her papers, or use simulated papers. If any loss occurs through breach of this condition, the insurer may avoid the contract.

37. NO IMPLIED WARRANTY OF NATIONALITY

1. In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured.

2. Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port.

3. Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage.

4. A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.

5. In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.

40. NO IMPLIED WARRANTY THAT GOODS ARE SEAWORTHY

1. In a policy on goods or other moveables there is no implied warranty that the goods or moveables are seaworthy.

2. In a voyage policy on goods or other moveables there is an implied warranty that at the commencement of the voyage the ship is not only seaworthy as a ship, but also that she is reasonably fit to carry the goods or other moveables to the destination contemplated by the policy.

41. WARRANTY OF LEGALITY

42. IMPLIED CONDITION AS TO COMMENCEMENT OF RISK

1. Where the subject-matter is insured by a voyage policy "at and from" or "from" a particular place, it is not necessary that the ship should be at that place when the contract is concluded, but there is an implied condition that the adventure shall be commenced within a reasonable time, and that if the adventure be not so commenced the insurer may avoid the contract.

2. The implied condition may be negatived by showing that the delay was caused by circumstances known to the insurer before the contract was concluded, or by showing that he waived the condition.

43. ALTERATION OF PORT OF DEPARTURE

1. Where, after the commencement of the risk, the destination of the ship is voluntarily changed from the destination contemplated by the policy, there is said to be a change of voyage.

2. Unless the policy otherwise provides, where there is a change of voyage, the insurer is discharged from liability as from the time of change, that is to say, as from the time when the determination to change it is manifested; and it is immaterial that the ship may not in fact have left the course of voyage contemplated by the policy when the loss occurs.

46. DEVIATION

1. Where a ship, without lawful excuse, deviates from the voyage contemplated by the policy, the insurer is discharged from liability as from the time of deviation, and it is immaterial that the ship may have regained her route before any loss occurs.

2. There is a deviation from the voyage contemplated by the policy—

a. Where the course of the voyage is specifically designated by the policy, and that course is departed from; or

b. Where the course of the voyage is not specifically designated by the policy, but the usual and customary course is departed from.

3. The intention to deviate is immaterial; there must be a deviation in fact to discharge the insurer from his liability under the contract.

47. SEVERAL PORTS OF DISCHARGE

1. Where several ports of discharge are specified by the policy, the ship may proceed to all or any of them, but, in the absence of any usage or sufficient cause to the contrary, she must proceed to them, or such of them as she goes to, in the order designated by the policy. If she does not there is a deviation.

2. Where the policy is to "ports of discharge", within a given area, which are not named, the ship must, in the absence of any usage or sufficient cause to the contrary, proceed to them, or such of them as she goes to, in their geographical order. If she does not there is a deviation.

48. DELAY IN VOYAGE

1. Deviation or delay in prosecuting the voyage contemplated by the policy is excused—

a. Where authorised by any special term in the policy; or

b. Where caused by circumstances beyond the control of the master and his employer; or

c. Where reasonably necessary in order to comply with an express or implied warranty; or

d. Where reasonably necessary for the safety of the ship or subject-matter insured; or

e. For the purpose of saving human life, or aiding a ship in distress where human life may be in danger; or

f. Where reasonably necessary for the purpose of obtaining medical or surgical aid for any person on board the ship; or

g. Where caused by the barratrous conduct of the master or crew, if barratry be one of the perils insured against.

2. When the cause excusing the deviation or delay ceases to operate, the ship must resume her course, and prosecute her voyage, with reasonable dispatch.

Assignment of Policy

50. WHEN AND HOW POLICY IS ASSIGNABLE

1. A marine policy is assignable unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss.

2. Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.

3. A marine policy may be assigned by indorsement thereon or in other customary manner.

51. ASSURED WHO HAS NO INTEREST CANNOT ASSIGN

The Premium

52. WHEN PREMIUM PAYABLE

1. Unless otherwise agreed, where a marine policy is effected on behalf of the assured by a broker, the broker is directly responsible to the insurer for the premium, and the insurer is directly responsible to the assured for the amount which may be payable in respect of losses, or in respect of returnable premium.

2. Unless otherwise agreed, the broker has, as against the assured, a lien upon the policy for the amount of the premium and his charges in respect of effecting the policy; and, where he has dealt with the person who employs him as a principal, he has also a lien on the policy in respect of any balance on any insurance account which may be due to him from such person, unless when the debt was incurred he had reason to believe that such person was only an agent.

54. EFFECT OF RECEIPT ON POLICY

Loss and Abandonment

55. INCLUDED AND EXCLUDED LOSSES

1. Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against.

2. In particular—

a. The insurer is not liable for any loss attributable to the wilful misconduct of the assured, but unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew;

b. Unless the policy otherwise provides, the insurer on ship or goods is not liable for any loss proximately caused by delay, although the delay be caused by a peril insured against;

c. Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject-matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.

56. PARTIAL AND TOTAL LOSS

1. A loss may be either total or partial. Any loss other than a total loss, as hereinafter defined, is a partial loss.

2. A total loss may be either an actual total loss, or a constructive total loss.

3. Unless a different intention appears from the terms of the policy, an insurance against total loss includes a constructive, as well as an actual, total loss.

4. Where the assured brings an action for a total loss and the evidence proves only a partial loss, he may, unless the policy otherwise provides, recover for a partial loss.

5. Where goods reach their destination in specie, but by reason of obliteration of marks, or otherwise, they are incapable of identification, the loss, if any, is partial, and not total.

57. ACTUAL TOTAL LOSS

1. Where the subject-matter insured is destroyed, or so damaged as to cease to be a thing of the kind insured, or where the assured is irretrievably deprived thereof, there is an actual total loss.

2. In the case of an actual total loss no notice of abandonment need be given.

58. MISSING SHIP

1. Subject to any express provision in the policy, there is a constructive total loss where the subject-matter insured is reasonably abandoned on account of its actual total loss appearing to be unavoidable, or because it could not be preserved from actual total loss without an expenditure which would exceed its value when the expenditure had been incurred.

2. In particular, there is a constructive total loss—

i. Where the assured is deprived of the possession of his ship or goods by a peril insured against, and (a) it is unlikely that he can recover the ship or goods, as the case may be, or (b) the cost of recovering the ship or goods, as the case may be, would exceed their value when recovered; or

ii. In the case of damage to a ship, where she is so damaged by a peril insured against that the cost of repairing the damage would exceed the value of the ship when repaired.In estimating the cost of repairs, no deduction is to be made in respect of general average contributions to those repairs payable by other interests, but account is to be taken of the expense of future salvage operations and of any future general average contributions to which the ship would be liable if repaired; or

iii. In the case of damage to goods, where the cost of repairing the damage and forwarding the goods to their destination would exceed their value on arrival.

61. EFFECT OF CONSTRUCTIVE TOTAL LOSS

1. Subject to the provisions of this section, where the assured elects to abandon the subject-matter insured to the insurer, he must give notice of abandonment. If he fails to do so the loss can only be treated as a partial loss.

2. Notice of abandonment may be given in writing, or by word of mouth, or partly in writing and partly by word of mouth, and may be given in terms which indicate the intention of the assured to abandon his insured interest in the subject-matter insured unconditionally to the insurer.

3. Notice of abandonment must be given with reasonable diligence after the receipt of reliable information of the loss, but where the information is of a doubtful character the assured is entitled to a reasonable time to make inquiry.

4. Where notice of abandonment is properly given, the rights of the assured are not prejudiced by the fact that the insurer refuses to accept the abandonment.

5. The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer after notice is not an acceptance.

6. Where a notice of abandonment is accepted the abandonment is irrevocable. The acceptance of the notice conclusively admits liability for the loss and the sufficiency of the notice.

7. Notice of abandonment is unnecessary where, at the time when the assured receives information of the loss, there would be no possibility of benefit to the insurer if notice were given to him.

8. Notice of abandonment may be waived by the insurer.

9. Where an insurer has re-insured his risk, no notice of abandonment need be given by him.

63. EFFECT OF ABANDONMENT

Where there is a valid abandonment the insurer is entitled to take over the interest of the assured in whatever may remain of the subject-matter insured, and all proprietary rights incidental thereto.

Upon the abandonment of a ship, the insurer thereof is entitled to any freight in course of being earned, and which is earned by her subsequent to the casualty causing the loss, less the expenses of earning it incurred after the casualty; and, where the ship is carrying the owner's goods, the insurer is entitled to a reasonable remuneration for the carriage of them subsequent to the casualty causing the loss.

Partial Losses

(Including Salvage & General Average & Particular Charges)

64. PARTICULAR AVERABE LOSS

A particular average loss is a partial loss of the subject-matter insured, caused by a peril insured against, and which is not a general average loss.

Expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured, other than general average and salvage charges, are called particular charges. Particular charges are not included in particular average.

65. SALVAGE CHARGES

Subject to any express provision in the policy, salvage charges incurred in preventing a loss by perils insured against may be recovered as a loss by those perils.

"Salvage charges" means the charges recoverable under maritime law by a salvor independently of contract. They do not include the expenses of services in the nature of salvage rendered by the assured or his agents, or any person employed for hire by them, for the purpose of averting a peril insured against. Such expenses, where properly incurred, may be recovered as particular charges or as a general average loss, according to the circumstal1ces under which they were incurred.

66. GENERAL AVERAGE LOSS

A general average loss is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice.

There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure.

Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution from the other parties interested, and such contribution is called a general average contribution.

Subject to any express provision in the policy, where the assured has incurred a general average expenditure, he may recover from the insurer in respect of the proportion of the loss which falls upon him; and, in the case of a general average sacrifice, he may recover from the insurer in respect of the whole loss without having enforced his right of contribution from the other parties liable to contribute.

Subject to any express provision in the policy, where the assured has paid, or is liable to pay, a general average contribution in respect of the subject insured, he may recover therefor from the insurer.

In the absence of express stipulation, the insurer is not liable for any general average loss or contribution where the loss was not incurred for the purpose of avoiding, or in connection with the avoidance of, a peril insured against.

Where ship, freight, and cargo, or any two of those interests, are owned by the same assured, the liability of the insurer in respect of general average losses or contributions is to be determined as if those subjects were owned by different persons.

Measure of Indemnity

67. EXTENT OF LIABILITY OF INSURER FOR LOSS

The sum which the assured can recover in respect of a loss on a policy by which he is insured, in the case of an unvalued policy to the full extent of the insurable value, or, in the case of a valued policy to the full extent of the value fixed by the policy, is called the measure of indemnity

Where there is a loss recoverable under the policy, the insurer, or each insurer if there be more than one, is liable for such proportion of the measure of indemnity as the amount of his subscription bears to the value fixed by the policy in the case of a valued policy, or to the insurable value in the case of an unvalued policy.

68. TOTAL LOSS

If the policy be a valued policy, the measure of indemnity is the sum fixed by the policy;

If the policy be an unvalued policy, the measure of indemnity is the insurable value of the subject-matter insured.

69. PARTIAL LOSS OF SHIP

Where the ship has been repaired, the assured is entitled to the reasonable cost of the repairs, less the customary deductions, but not exceeding the sum insured in respect of any one casualty;

Where the ship has been only partially repaired, the assured is entitled to the reasonable cost of such repairs, computed as above, and also to be indemnified for the reasonable depreciation, if any, arising from the unrepaired damage, provided that the aggregate amount shall not exceed the cost of repairing the whole damage, computed as above;

Where the ship has not been repaired, and has not been sold in her damaged state during the risk, the assured is entitled to be indemnified for the reasonable depreciation arising from the unrepaired damage, but not exceeding the reasonable cost of repairing such damage, computed as above.

70. PARTIAL LOSS OF FREIGHT

Where part of the goods, merchandise or other moveables insured by a valued policy is totally lost, the measure of indemnity is such proportion of the sum fixed by the policy as the insurable value of the part lost bears to the insurable value of the whole, ascertained as in the case of an unvalued policy;

Where part of the goods, merchandise, or other moveables insured by an unvalued policy is totally lost, the measure of indemnity is the insurable value of the part lost, ascertained as in case of total loss;

Where the whole or any part of the goods or merchandise insured has been delivered damaged at its destination, the measure of indemnity is such proportion of the sum fixed by the policy in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the difference between the gross sound and damaged values at the place of arrival bears to the gross sound value;

"Gross value" means the wholesale price or, if there be no such price, the estimated value, with, in either case, freight, landing charges, and duty paid beforehand; provided that, in the case of goods or merchandise customarily sold in bond, the bonded price is deemed to be the gross value. "Gross proceeds" means the actual price obtained at a sale where all charges on sale are paid by the sellers.

72. APPORTIONMENT OF VALUATION

Where different species of property are insured under a single valuation, the valuation must be apportioned over the different species in proportion to their respective insurable values, as in the case of an unvalued policy. The insured value of any part of a species is such proportion of the total insured value of the same as the insurable value of the part bears to the insurable value of the whole, ascertained in both cases as provided by this Act.

Where a valuation has to be apportioned, and particulars of the prime cost of each separate species, quality, or description of goods cannot be ascertained, the division of the valuation may be made over the net arrived sound values of the different species, qualities, or descriptions of goods.

73. GENERAL AVERAGE CONTRIBUTIONS AND SALVAGE CHARGES

Subject to any express provision in the policy, where the assured has paid, or is liable for, any general average contribution, the measure of indemnity is the full amount of such contribution, if the subject-matter liable to contribution is insured for its full contributory value; but, if such subject-matter be not insured for its full contributory value, or if only part of it be insured, the indemnity payable by the insurer must be reduced in proportion to the under insurance, and where there has been a particular average loss which constitutes a deduction from the contributory value, and for which the insurer is liable, that amount must be deducted from the insured value in order to ascertain what the insurer is liable to contribute.

Where the insurer is liable for salvage charges the extent of his liability must be determined on the like principle.

74. LIABILITIES TO THIRD PARTIES

Where there has been a loss in respect of any subject-matter not expressly provided for in the foregoing provisions of this Act, the measure of indemnity shall be ascertained, as nearly as may be, in accordance with those provisions, in so far as applicable to the particular case.

Nothing in the provisions of this Act relating to the measure of indemnity shall affect the rules relating to double insurance, or prohibit the insurer from disproving interest wholly or in part, or from showing that at the time of the loss the whole or any part of the subject-matter insured was not at risk under the policy.

76. PARTICULAR AVERAGE WARRANTIES

Where the subject-matter insured is warranted free from particular average, the assured cannot recover for a loss of part, other than a loss incurred by a general average sacrifice, unless the contract contained in the policy be apportionable; but, if the contract be apportionable, the assured may recover for a total loss of any apportionable part.

Where the subject-matter insured is warranted free from particular average, either wholly or under a certain percentage, the insurer is nevertheless liable for salvage charges, and for particular charges and other expenses properly incurred pursuant to the provisions of the suing and labouring clause in order to avert a loss insured against.

Unless the policy otherwise provides, where the subject-matter insured is warranted free from particular average under a specified percentage, a general average loss cannot be added to a particular average loss to make up the specified percentage.

For the purpose of ascertaining whether the specified percentage has been reached, regard shall be had only to the actual loss suffered by the subject-matter insured. Particular charges and the expenses of and incidental to ascertaining and proving the loss must be excluded.

77. SUCCESSIVE LOSSES

Unless the policy otherwise provides, and subject to the provisions of this Act, the insurer is liable for successive losses, even though the total amount of such losses may exceed the sum insured.

Where, under the same policy, a partial loss, which has not been repaired or otherwise made good, is followed by a total loss, the assured can only recover in respect of the total loss:

Provided that nothing in this section shall affect the liability of the insurer under the suing and labouring clause.

78. SUING & LABOURING CLAUSE

Where the policy contains a suing and labouring clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance, and the assured may recover from the insurer any expenses properly incurred pursuant to the clause, notwithstanding that the insurer may have paid for a total loss, or that the subject-matter may have been warranted free from particular average, either wholly or under a certain percentage.

General average losses and contributions and salvage charges, as defined by this Act, are not recoverable under the suing and labouring clause.

Expenses incurred for the purpose of averting or diminishing any loss not covered by the policy are not recoverable under the suing and labouring clause.

Subject to the foregoing provisions, where the insurer pays for a partial loss, he acquires no title to the subject-matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the assured in and in respect of the subject-matter insured as from the time of the casualty causing the loss, in so far as the assured has been indemnified, according to this Act, by such payment for the loss.

80. RIGHT OF CONTRIBUTION

Where the assured is over-insured by double insurance, each insurer is bound, as between himself and the other insurers, to contribute rateably to the loss in proportion to the amount for which he is liable under his contract.

If any insurer pays more than his proportion of the loss, he is entitled to maintain an action for contribution against the other insurers, and is entitled to the like remedies as a surety who has paid more than his proportion of the debt.

81. EFFECT OF UNDER INSURANCE

Return of Premium

82. ENFORCEMENT OF RETURN

If already paid, it may be recovered by the assured from the insurer; and

If unpaid, it may be retained by the assured or his agent.

83. RETURN BY AGREEMENT

Where the consideration for the payment of the premium totally fails, and there has been no fraud or illegality on the part of the assured or his agents, the premium is thereupon returnable to the assured.

Where the consideration for the payment of the premium is apportionable and there is a total failure of any apportionable part of the consideration, a proportionate part of the premium is, under the like conditions, thereupon returnable to the assured.

In particular-

Where the policy is void, or is avoided by the insurer as from the commencement of the risk, the premium is returnable, provided that there has been no fraud or illegality on the part of the assured; but if the risk is not apportionable, and has once attached, the premiun1 is not returnable;

Where the subject-matter insured, or part thereof, has never been imperilled, the premium, or, as the case may be, a proportionate part thereof, is returnable:Provided that where the subject-matter has been insured "lost or not lost" and has arrived in safety at the time when the contract is concluded, the premium is not returnable unless, at such time, the insurer knew of the safe arrival.

Where the assured has no insurable interest throughout the currency of the risk, the premium is returnable, provided that this rule does not apply to a policy effected by way of gaming or wagering;

Where the assured has a defeasible interest which is terminated during the currency of the risk, the premium is not returnable;

Where the assured has over-insured under an unvalued policy, a proportionate part of the premium is returnable;

Subject to the foregoing provisions, where the assured has over-insured by double insurance, a proportionate part of the several premiums is returnable:Provided that, if the policies are effected at different times, and any earlier policy has at any time borne the entire risk, or if a clainm has been paid on the policy in respect of the full sum insured thereby, no premium is returnable in respect of that policy, and when the double insurance is effected knowingly by the assured no premium is returnable.

Mutual Insurance

85. MODIFICATION OF ACT IN CASE OF MUTUAL INSURANCE

Where two or more persons mutually agree to insure each other against marine losses there is said to be a mutual insurance.

The provisions of this Act relating to the premium do not apply to mutual insurance, but a guarantee, or such other arrangement as may be agreed upon, may be substituted for the premium.

The provisions of this Act, in so far as they may be modified by the agreement of the parties, may in the case of mutual insurance be modified by the terms of the policies issued by the association, or by the rules and regulations of the association.

Subject to the exceptions mentioned in this section, the provisions of this Act apply to a mutual insurance.

Supplemental

86. RATIFICATION BY ASSURED

Where any right, duty, or liability would arise under a contract of marine insurance by implication of law, it may be negatived or varied by express agreement, or by usage, if the usage be such as to bind both parties to the contract.

The provisions of this section extend to any right, duty, or liability declared by this Act which may be lawfully modified by agreement.

88. REASONABLE TIME, ETC., A QUESTION OF FACT

Nothing in this Act, or in any repeal effected thereby, shall affect-

The provisions of the Stamp Act 1891, or any enactment for the time being in force relating to the revenue:

The provisions of the Companies Act 1862, or any enactment amending or substituted for the same;

The provisions of any statute not expressly repealed by this Act.

The rules of the common law including the law merchant, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to contracts of marine insurance.

92. REPEALS

FIRST SCHEDULE (s 30)

Form of policy

BE IT KNOWN THAT … as well in … own name as for and in the name and names of all and every other person or persons to whom the same doth, may, or shall appertain, in part or in all doth make assurance and cause … and them, and every one of them, to be insured lost or not lost, at and from …

Upon any kind of goods and merchandise, and also upon the body, tackle, apparel, ordnance, munition, artillery, boat, and other furniture, of and in the good ship or vessel called the … whereof is master under God, for this present voyage, … or whosoever else shall to for master in the said ship, or by whatsoever other name or names the said ship, or the master thereof, is or shall be named or called; beginning the adventure upon the said goods and merchandises from the loading thereof aboard the said ship.

upon the said ship, etc.

and so shall continue and endure, during her abode there,. upon the said ship, etc.

And further, until the said ship, with all her ordnance, tackle, apparel; etc., and goods and merchandises whatsoever shall be arrived at …

upon the said ship, etc., until she hath moored at anchor twenty-four hours in good safety; and upon the goods and merchandises, until the same be there discharged and safely landed. And it shall be lawful for the said ship, etc., in this voyage to proceed and sail to and touch and stay at any ports or places whatsoever.

without prejudice to this insurance. The said ship, etc., goods and merchandises, etc., for so much as concerns the assured by agreement between the assured and assurers in this policy, are and shall be valued at …

Touching the adventures and perils which we the assurers are contented to bear and do take upon us in this voyage: they are of the seas, men of war, fire, enemies, pirates, rovers, thieves, jettisons, letters of mart and countermart, surprisals, takings at sea, arrests, restraints, and detainments of all kings, princes, and people, of what nation, condition, or quality soever, barratry of the master and mariners, and of all other perils, losses, and misfortunes, that have or shall come to the hurt, detriment, or damage of the said goods and merchandises, and ship, etc., or any part thereof. And in case of any loss or misfortune it shall be lawful to the assured, their factors, servants and assigns, to sue, labour, and travel for, in and about the defence, safeguards, and recovery of the said goods and merchandises, and ship, etc., or any part thereof, without prejudice to this insurance; to the charges whereof we, the assurers, will contribute each one according to the rate and quantity of his sum herein assured. And it is especially declared and agreed that no acts of the insurer or insured in recovering, saving, or preserving the property insured shall be considered as a waiver, or acceptance of abandonment. And it is agreed by us, the insurers, that this writing or policy of assurance shall be of as much force and effect as the surest writing or policy of assurance heretofore made in Lombard Street, or in the Royal Exchange, or elsewhere in London. And so we, the assurers, are contented, and do hereby promise and bind ourselves, each one for his own part, our heirs, executors, and goods to the assured, their executors, administrators, and assigns, for the true performance of the premises, confessing ourselves paid the consideration due unto us for this assurance by the assured, at and after the rate of …

IN WITNESS whereof we, the assurers, have subscribed our names and sums assured in London.

N.B. — Corn, fish, salt, fruit, flour, and seed are warranted free from average, unless general, or the ship be stranded — sugar, tobacco, hemp, flax, hides and skins are warranted free from average, under five pounds per cent., and all other goods, also the ship and freight, are warranted free from average, under three pounds per cent. unless general, or the ship be stranded.

Rules for construction of policy

The following are the rules referred to by this Act for the construction of a policy in the above or other like form, where the context does not otherwise require

Where the subject-matter is insured "lost or not lost", and the loss has occurred before the contract is concluded, the risk attaches, unless at such time the assured was aware of the loss, and the insurer was not.

Where the subject-matter is insured "from" a particular place, the risk does not attach until the ship starts on the voyage insured.

Where a ship is insured "at and from" a particular place, and she is at that place in good safety when the contract is concluded, the risk attaches immediately.

If she be not at that place when the contract is concluded, the risk attaches as soon as she arrives there in good safety, and, unless the policy otherwise provides, it is immaterial that she is covered by another policy for a specified time after arrival.

Where chartered freight is insured "at and from" a particular place, and the ship is at that place in good safety when the contract is concluded the risk attaches immediately. If she be not there when the contract is concluded, the risk attaches as soon as she arrives there in good safety.

Where freight, other than chartered freight, is payable without special conditions and is insured "at and from" a particular place, the risk attaches pro rata as the goods or merchandise are shipped; provided that if there be cargo in readiness which belongs to the shipowner, or which some other person has contracted with him to ship, the risk attaches as soon as the ship is ready to receive such cargo.

Where goods or other moveables are insured "from the loading thereof", the risk does not attach until such goods or moveables are actually on board, and the insurer is not liable for them while in transit from the shore to ship.

Where the risk on goods or other moveables continues until they are "safely landed", they must be landed in the customary manner and within a reasonable time after arrival at the port of discharge, and if they are not so landed the risk ceases.

In the absence of any further licence and usage, the liberty to touch and stay "at any port or place whatsoever" does not authorise the ship to depart from the course of her voyage from the port of departure to the port of destination.

The term "perils of the seas" refers only to fortuitous accidents or casualties of the seas. It does not include the ordinary action of the winds and waves.

The term "pirates" includes passengers who mutiny and rioters who attack the ship from the shore.

The term "thieves" does not cover clandestine theft or a theft committed by any one of the ship's company, whether crew or passengers.

The term "arrests, etc., of kings, princes, and people" refers to political or executive acts, and does not include a loss caused by riot or by ordinary judicial process.

The term "barratry" includes every wrongful act wilfully committed by the master or crew to the prejudice of the owner, or, as the case may be, the charterer.

The term "all other perils" includes only perils similar in kind to the perils specifically mentioned in the policy.

The term "average unless general" means a partial loss of the subject-matter insured other than a general average loss, and does not include "particular charges".

Where the ship has stranded, the insurer is liable for the excepted losses, although the loss is not attributable to the stranding, provided that when the stranding takes place the risk has attached and, if the policy be on goods, that the damaged goods are on board.

The term "ship" includes the hull, materials and outfit, stores and provisions for the officers and crew, and, in the case of vessels engaged in a special trade, the ordinary fittings requisite for the trade, and also, in the case of a steamship, the machinery, boilers, and coals and engine stores, if owned by the assured.

The term "freight" includes the profit derivable by a shipowner from the employment of his ship to carry his own goods or moveables, as well as freight payable by a third party, but does not include passage money.

The term "goods" means goods in the nature of merchandise, and does not include personal effects or provisions and stores for use on board.In the absence of any usage to the contrary, deck cargo and living animals must be insured specifically, and not under the general denomination of goods. :-

The enactments mentioned in the Second Schedule to this Act are hereby repealed to the extent specificed in that schedule.

93. COMMENCEMENT

This Act shall come into operation on the first day of January, 1907.

94. SHORT TITLE

This Act may be cited as the Marine Insurance Act 1906.

:Repealed by the Statute Law Revision Act 1927.</dir></dir>:Repealed by the Statute Law Revision Act 1927.</dir></dir>

Where by this Act any reference is made to reasonable time, reasonable premium, or reasonable diligence, the question what is reasonable is a question of fact.

89. SLIP AS EVIDENCE

Where there is a duly stamped policy, reference may be made, as heretofore, to the slip or covering note, in any legal proceeding.

90. INTERPRETATION OF TERMS

In this Act, unless the context or subject-matter otherwise requires,—

" Action " includes counter-claim and set off:

" Freight " includes the profit derivable by a shipowner from the employment of his ship to carry his own goods or moveables, as well as freight payable by a third party, but does not include passage money:

" Moveables " means any moveable tangible property, other than the ship, and includes money, valuable securities, and other documents:

" Policy " means a marine policy.

91. Savings

Where a contract of marine insurance is in good faith effected by one person on behalf of another, the person on whose behalf it is effected may ratify the contract even after he is aware of a loss.

87. IMPLIED OBLIGATIONS VARIED BY AGREEMENT OR USAGE

Where the policy contains a stipulation for the return of the premium, or a proportionate part thereof, on the happening of a certain event, and that event happens, the premium, or, as the case may be, the proportionate part thereof, is thereupon returnable to the assured.

84. RETURN FOR FAILURE OF CONSIDERATION

Where the premium or a proportionate part thereof is, by this Act, declared to be returnable,—

Where the assured is insured for an amount less than the insurable value or, in the case of a valued policy, for an amount less than the policy valuation, he is deemed to be his own insurer in respect of the uninsured balance.

Where the assured has effected an insurance in express terms against any liability to a third party, the measure of indemnity, subject to any express provision in the policy, is the amount paid or payable by him to such third party in respect of such liability.

75. GENERAL PROVISIONS AS TO MEASURE OF INDEMNITY

Subject to any express provision in the policy, where there is a partial loss of freight, the measure of indemnity is such proportion of the sum fixed by the policy in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the proportion of freight lost by the assured bears to the whole freight at the risk of the assured under the policy.

71. PARTIAL LOSS OF GOODS, MERCHANDISE, ETC.

Where there is a partial loss of goods, merchandise, or other moveables, the measure of indemnity, subject to any express provision in the policy, is as follows:—

Where a ship is damaged, but is not totally lost, the measure of indemnity, subject to any express provision in the policy, is as follows:—

Subject to the provisions of this Act and to any express provision in the policy, where there is a total loss of the subject-matter insured,—

Where there is a constructive total loss the assured may either treat the loss as a partial loss, or abandon the subject-matter insured to the insurer and treat the loss as if it were an actual total loss.

62. NOTICE OF ABANDONMENT

Where the ship concerned in the adventure is missing, and after the lapse of a reasonable time no news of her has been received, an actual total loss may be presumed.

59. EFFECT OF TRANSSHIPMENT, ETC.

Where, by a peril insured against, the voyage is interrupted at an intermediate port or place, under such circumstances as, apart from any special stipulation in the contract of affreightment, to justify the master in landing and re-shipping the goods or other moveables or in transshipping them, and sending them on to their destination, the liability of the insurer continues, notwithstanding the landing or transshipment.

60. CONSTRUCTIVE TOTAL LOSS DEFINED

Where a marine policy effected on behalf of the assured by a broker acknowledges the receipt of the premium, such acknowledgment is, in the absence of fraud, conclusive as between the insurer and the assured, but not as between the insurer and broker.

Unless otherwise agreed, the duty of the assured or his agent to pay the premium, and the duty of the insurer to issue the policy to the assured or his agent, are concurrent conditions, and the insurer is not bound to issue the policy until payment or tender of the premium.

53. POLICY EFFECTED THROUGH BROKER

Where the assured has parted with or lost his interest in the subject-matter insured, and has not, before or at the time of so doing, expressly or impliedly agreed to assign the policy, any subsequent assignment of the policy is inoperative:

Provided that nothing in this section affects the assignment of a policy after loss.

In the case of a voyage policy, the adventure insured must be prosecuted throughout its course with reasonable dispatch, and, if without lawful excuse it is not so prosecuted, the insurer is discharged from liability as from the time when the delay became unreasonable.

49. EXCUSES FOR DEVIATION OR DELAY

Where the place of departure is specified by the policy, and the ship instead of sailing from that place sails from any other place, the risk does not attach.

44. SAILING FOR DIFFERENT DESTINATION

Where the destination is specified in the policy, and the ship, instead of sailing for that destination, sails for any other destination, the risk does not attach.

45. CHANGE OF VOYAGE

There is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner.

There is no implied warranty as to the nationality of a ship, or that her nationality shall not be changed during the risk.

38. WARRANTY OF GOOD SAFETY

Where the subject-matter insured is warranted "well" or "in good safety" on a particular day, it is sufficient if it be safe at any time during that day.

39. WARRANTY OF SEAWORTHINESS OF SHIP

An unvalued policy is a policy which does not specify the value of the subject-matter insured, but, subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained, in the manner hereinbefore specified.

29. FLOATING POLICY BY SHIP OR SHIPS

26. DESIGNATION OF SUBJECT-MATTER

:Sub-s (2): repealed by the Finance Act 1959, ss 30(5), (7), 37(5), Sch 8, Pt II.

24. SIGNATURE OF INSURER

A contract of marine insurance is deemed to be concluded when the proposal of the assured is accepted by the insurer, whether the policy be then issued or not; and, for the purpose of showing when the proposal was accepted, reference may be made to the slip or covering note or other customary memorandum of the contract, [although it be stamped].

22. CONTRACT MUST BE ENBODIED IN POLICY

Subject to the provisions of any statute, a contract of marine insurance is inadmissible in evidence unless it is embodied in a marine policy in accordance with this Act. The policy may be executed and issued either at the time when the contract is concluded, or afterwards.

23. WHAT POLICY MUST SPECIFY

A Marine policy must specify—

:[Words in italics] deleted by the Finance Act 1959, s 37(5), Sch 8, Pt II.</dir></dir>

Subject to the provisions of the preceding section as to circumstances which need not be disclosed, where an insurance is effected for the assured by an agent, the agent must disclose to the insurer—

Subject to any express provision or valuation in the policy, the insurable value of the subject-matter insured must be ascertained as follows—

Where the assured assigns or otherwise parts with his interest in the subject-matter insured, he does not thereby transfer to the assignee his rights under the contract of insurance, unless there be an express or implied agreement with the assignee to that effect.

But the provisions of this section do not affect a transmission of interest by operation of law.

The lender of money on bottomry or respondentia has an insurable interest in respect of the loan.

11. MASTER'S AND SEAMEN'S WAGES

The master or any member of the crew of a ship has an insurable interest in respect of his wages.

12. ADVANCE FREIGHT

In the case of advance freight, the person advancing the freight has an insurable interest, in so far as such freight is not repayable in case of loss.

13. CHARGES OF INSURANCE

The assured has an insurable interest in the charges of any insurance which he may effect.

14. QUANTUM OF INTEREST

A partial interest of any nature is insurable.

9. RE-INSURANCE

A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby by agreed, against marine losses, that is to say, the losses incident to marine adventure.

2. MIXED SEA AND LAND RISKS

Staff Author

Date 13/10/2010

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