Effect of the assignment notice
The intention of the Policies of Insurance Act 1867 was to make it easier for persons to know where they stood as regards assignment of insurance policies. The intention was never to change the law on assignment rights.
So whilst the act gave the assignee who registered their notice some advantages when it came to taking legal action against the life insurance office it did not remove common law rights about what was equitable as regards the assignment of monies under the life insurance policy.
So a firm who lent money against the assets of a life policy knowing that it had already been assigned could not change that position by then registering his notice first. He had already lent money in the knowledge of the position he was in. If he had lent money and took assignment but new that the borrower could not produce the life policy, might be said to have had constructive warning that the policy had already been assigned.
The effect of notice is therefore,
- To give the assignee a right to sue in his own name,
- To bind the insurer to that assignee so that they can not pay another claim,
- To gain priority over earlier assignees where they have not bothered to register their claim,
- To preserve priority of claim over subsequent assignees.
Other sections of the Policies of Insurance Act 1867
Section 5 allows that assignment can be done by endorsement to the policy or by a separate instrument, subject to stamping.
Whilst the act refers to ‘policy of life insurance’ by view of its definition in section 7 it could arguably apply to other contracts which secure a payment depending upon the duration of human life. So would apply to pure endowments and annuities as well.
Absolute assignments
An absolute assignment is the complete assignment of the life policy either by way of gift or for value (by sale). The assignor effectively signs over the whole policy and looses all their own rights in the policy. The new owner therefore can provide the life office with a good discharge for the monies under the policy by presenting the policy document and the deed of assignment.
To protect their own interest if they are obtaining the assignment for value, the new owner will check first with the life office that premiums are paid up to date and that no other assignment has been registered.