cellation of the policy by the insured, which would mean a higher premium due to the short rate charged when a policyholder cancels his policy. Then, too, in the case of pledge, the real owner contemplates the redemption of his goods and if it were not for the possibility of assignment the unnecessary issuance of a third policy would be involved. For there would be the policy which he held as owner, a second policy issued to the pledgee, and later, when the property was redeemed, a third policy protecting the original owner would be needed to replace the two cancelled. The policy provision relating to assignment.-Recognizing the necessity of assignment and the need for uniformity of action when a policy is assigned, it is customary for standard policies to contain clauses governing assignment, and there is usually a restriction stipulating that unless otherwise provided in writing and added to the policy it shall be void if assigned before a loss. The object of this restriction is to prevent an assignment to an undesirable person. The insurance policy is a personal contract and assignment without any supervision or restrictions means insuring greater moral hazard and the frequent payment of claims to persons whom the companies possibly would not originally have insured. Thus, it is not only fair to the insurance company but also to the premium payers that the company should decide with whom they wish to contract. Methods of assigning. So frequently is insurance assigned that most policies have two forms printed on the back for the purpose, one for the assignment by the insured and the other for the consent of the insurer. Unless specified in the policy no particular form is necessary either for the assignment or the consent, but if it is prescribed, then any assignment not in entire compliance is incomplete. THE CONSENT BY COMPANY TO ASSIGNMENT OF INTEREST interest of....... INSURANCE COMPANY, NEW YORK, hereby consents that the as owner of the property covered by this Policy be assigned to..... ...Agent. Dated.... .19.... The assignment need not be in writing, as a verbal assignment might possibly be held sufficient in certain cases. In securing consent, however, express agreement is usually necessary, obtained through a properly authorized official or agent of the company. Soliciting agents and brokers seldom possess the requisite power for this. Even when the policy prescribes the method of assignment it is not necessary to follow it when the insurance has been taken out for the benefit of "assigns" or "for account of whom it may concern" or the interest indicated by phrases of similar effect. In these cases, consent is implied and the assignee acquires rights against the insurer. Another method of transferring protection where there is no change of title is to have the insurer issue insurance certificates representing the policy. Here the holder of the policy gives certificates properly countersigned by the company and made payable to the party designated. Effect of assignment before a loss.-The effect of assignment depends upon the circumstances of the case, the two most important distinctions being when there is a transfer of title and when there is not. In case of a transfer of title, even where there is a covenant to insure for the benefit of the transferee, the insurance does not necessarily pass, as a policy ordinarily expires with the transfer of title as far as the transferor is concerned. But where the assignment is made and the consent of the company is given it has been held by the courts that this is the equivalent of a new policy. Therefore, if the title changes, any prior violation of the policy by the original holder is waived, and the only parties to the contract are the insurer and the assignee. As opposed to this there is the assignment where no transfer of title has taken place, i.e., where the assignee is substituted for the assignor. If the assignor has forfeited before the assignment he can assign nothing. The assignee takes the policy subject to all prior set-offs, even though all the policy provisions concerning assignment have been followed to the letter. Thus, a mortgagor as an assignor can present only that which he possesses, and in most States prior forfeiture due to some violation of the contract makes the policy void, except where a standard mortgage clause has been endorsed thereon. This clause, as we have seen, waives all the prior acts of the mortgagor. Assuming, then, that the assignment is valid in all its details and no forfeiture has occurred prior or subsequent to the assignment, the assignee assumes the position of the assignor in his relation to the insurance company. He is vested with all the rights of the policy-holder and can enforce these rights against the company in his own name. Likewise, the company has rights against him-in other words, a contractual relationship has been established between them. Effect of assignment after a loss.-There is nothing illegal in assigning the proceeds of a loss, as that is the mere assignment of a debt that is due and is no different from the assignment of an "account receivable" by a mercantile house. The courts have even decided that it is against public policy to permit a company to stipulate in their contract that they will not make payment to a person so appointed, since it amounts to a sale or transfer of a chose in action, which is always permitted in equity. However, it should not be construed from this that if the property has been transferred before a loss, the insurance can always be transferred after a loss so as to give the purchaser rights thereunder. Strictly construed, the policy provision previously referred to would appear to state that any assignment before a loss without consent relieves the company of all liability. But this depends upon the interpretation of the word "assignment," and the courts have often considered that certain cases of transfer are not "assignments" as contemplated by the above. clause. Only cases where the assignor parts with all his rights and creates a privity between the assignee and the insurer are so considered. As instances where the latter is not true, we have: 1. Assignment for the benefit of a creditor. 2. Assignment of the amount secured by the policy. 4. Deposit of policy as a pledge. 5. Deposit of policy as collateral for a chattel mortgage. 6. Assignment with a bill of lading as collateral security. This is not to say that the assignee acquires the rights against the insurer possessed by the insured, or the rights which would have been obtained by an assignment with the consent of the insurer. These are merely cases where the policy remains in effect and where the assignee has a claim upon the proceeds of such policy when paid to the assignor. CHAPTER XIV THE FIRE INSURANCE CONTRACT In this chapter we will discuss the basis of fire insurance, that is, the contract between the two parties; and since all the relations of the parties are summed up in this contract such a discussion might be extended until it covered every phase of the fire insurance business. Many of such phases, however, we have considered in other chapters and need not refer to here. This chapter is concerned mainly with the conditions of the fire insurance policy, the meaning of the various provisions found therein and the reasons for the existence of such provisions. The printed policy is often modified by the addition of endorsements and clauses but this subject must be postponed to the following chapter. Development of the standard policy.—In the early days of fire insurance every company issued a policy which suited its particular needs. While at first policies were written largely at the home offices of the companies, the spread of the insurance idea caused more and more power to be placed in the hands of the agents and, dealing with an insured miles away, the company ran the risk not only of the incompetence of agents, but dishonesty of the insured. The original simple. policy accordingly became hedged about by a multitude of restrictions, policies lacked uniformity, and some companies attempted to devise policies which would impose as little liability upon themselves as possible. As stated in a court decision of the period, the provisions were of such bulk and character that they were not to be understood by men in general, even after laborious study. They were intermixed with subjects in which the premium payer had no interest, and some of the most material parts were concealed in a mass of rubbish on the back of the policy and the following page, where few would think of looking. As if it were feared that some one would, in spite of these difficulties, discover the meaning of the contract, it was printed in extremely small type and long crowded lines so that "the perusal of it was made physically difficult, painful and injurious." After a time even the 199 |