Who may take insurance?

Category: Law on Insurance

Section 54. When an insurance contract is executed with an agent or trustee as the insured, the fact that his principal or beneficiary is the real party in interest may be indicated by describing the insured as agent or trustee, or by other general words in the policy.

Who may take insurance?

An insurance may be taken by a person, personally or through his agent or trustee.

If the insurance is taken by an agent or trustee, what must the agent or trustee do?

Since the insurance is to be applied exclusively to the interest of the person in whose name and for whose benefit it is made, the agent or trustee when making an insurance contract for or on behalf of his principal should, indicate that he is merely acting in a representative capacity by signing as such agent or trustee, or by other general terms in the policy.

Section 55.  To render an insurance effected by one partner or part-owner, applicable to the interest of his co-partners or other part-owners, it is necessary that the terms of the policy should be such as are applicable to the joint or common interest.

What happens when the insurance is effected by a partner or a part-owner?

A partner or part-owner who insures partnership property in his own name limits the contract to his individual share UNLESS the terms of the policy clearly show that the insurance was meant to cover also the shares of the other partners.

Section 56. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons, only he who can show that it was intended to include him can claim the benefit of the policy.

What happens when the description of the insured is general?

In order that the insurance may be applied to the interest of the person claiming the benefit of the policy, he must show that he is the person named or described or that he belongs to the class of persons comprehended in the policy.

Example?

If the policy is payable “to the children”, you must show that you are a child of the deceased.  Not a grand-child, nor a great-grand-child.

Section 57.  A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured.

Section 58.  The mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy and the thing insured.

What is the reason behind Sec. 58?

Sec. 58 follows from the well established principle that a policy is a personal contract with the insured and does NOT run with the insured property unless so expressly stipulated, and in the absence of an assignment of the policy with the insurer’s consent, the purchaser of the interest of the property requires no privity with the insurer.

In reading sec. 58, take note of Sec. 19 and 20.

Section 19. An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but need not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.

Section 20. Except in the cases specified in the next four sections, and in the cases of life, accident and health insurance, a change of interest in any part of a thing insured, unaccompanied by a corresponding change of interest in the insurance, suspends the insurance to an equivalent extent, until the interests in the thing and the interest in the insurance are vested in the same person.

Problem.

A borrowed 5,000 from B, and to secure payment of his obligation, he mortgaged his house to B.  B then insured the house for 5T.  Subsequently, B assigned his mortgage credit to X, but did not make the corresponding transfer of his right over the insurance policy.  IF the house burns down, is Paul entitled to collect the insurance money as assignee-mortgagee?

NO, since B did not assign his right over the insurance policy to X.  A purchaser of insured property who does Not take the precaution to obtain a transfer of the policy on the insurance, cannot in case of loss, recover upon the contract, as the transfer of the property has the effect of suspending the insurance until the purchaser becomes the owner of the policy as well as the property insured.