Maritime Insurance Law Part 10

Pursuant to the earlier topic of Introduction to Maritime Law in Malaysia, published on 22 February 2021, in the coming series the basis and elements of Marine Insurance claims will be explored.

Persons Who May Claim On A Policy

1. Section 26 MIA

   Section 26 MIA provides as follows:-

   1. The subject-matter insured must be designated in a marine policy with reasonable certainty
   2. The nature and extent of the interest of the assured in the subject-matter insured need not be specified in the policy.
   3. 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.
   4. In the application of this section regard shall be had to any usage regulating the designation of the subject-matter insured.

2. Summary of the Law

   As a general rule the subjective intention of a party which has not been communicated cannot determine the meaning of the contract (Tomlinson v Hepburn).

3. Derivative Interest In Policy

   An assignee can have a derivative interest (i.e as an assignee or mortgagee) in a policy. The intention of the broker or other agent, who effects the insurance is immaterial (Boston Fruit Co v British & Foreign Marine Insurance Co)

4. Methods Of Assigning A Maritime Policy

   A marine policy can be assigned pursuant to Section 50 MIA which provides as follows:-

   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.
      The courts are prone to allow any kind of assignment for a marine policy as seen in (Raiffeisen Zentralbank Osterreich v Five Star General Trading LLC).

5. Assignment of Proceeds and Claims

   The proceeds of an insurance policy can be assigned and the effect of assignment after the loss is to transfer the chose in action to the assignee (Lloyd v Fleming).An assured can possibly assign a present or future claim under the policy. But under a statute only a present insurance policy which is assignable. If no claim has arisen at the time of the assignment, Section 136 of the Law of Property Act 1925 does not apply.
   In Raiffeisen Zentralbank Osterreich v Five Star General Trading LLC it was held that future insurance claims which depended on possible future casualties can never be assigned under S. 136 of the Law Property Act 1925. Future insurance is also not applicable under Section 50 MIA.

6. Assignment under MIA

   As seen earlier Section 50 MIA gives rights to parties to assign a marine insurance to a third party unless assignments are not allowed by any express provisions within the policy.
   Section 51 MIA also deals with assignments of marine insurance and provides as follows:-
   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.

7. Mode And Form Of Assignment

   Indorsement were previously utilized under MIA as provided under section 50(3) MIA to assign a marine insurance and there is no formal requirement of a notice of assignment to effect the assignment. Now the more common method of assignment is by electronic indorsement or certification.

8. Sale Of Subject Matter Does Not Assign Policy

   Section 15 MIA governs this and provides 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.

9. Scope Of The Right To Assign The Policy

   A valid assignment need the following to be present at the time of assignment:-

   1. an insurable interest in the subject matter of the policy vested in the assignor;
   2. continuance of the risk of perils of the sea insured against in the policy
   3. the assignment of an insurable interest in the subject matter of the policy to the assignee and its exposure to the perils during the continuance of the risk (Williams v Atlantic Assurance, The Elvidis Era and Raiffeisen Zentralbank Osterreich v Five Star General Trading LLC)

10. Assignee To Sue In His Own Name

    Previously the person who takes out the insurance cover has to bring an action as a trustee of the assignee (Gibson v Winter). This is prior to the Policies of Marine Insurance Act 1868. This was repeated in section 50 of MIA.

11. Effect Of Assignment On Parties’ Rights

    Section 50(2) MIA states “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”. (Pickersgill v London & Provincial General Insurance Co and La Banque Financiere de la Cite SA v Westgate Insurance Co Ltd).Where the assignor has assigned the rights in the policy to the assignee, the assignor cannot affect any change on the policy after the assignment without any authorization from the assignee who has taken over the position of the assignor (The Evelpidis Era).

12. Need For Contemporaneous Assignment Of Policy And Subject Matter

    It is necessary for the assignment of the policy and the assignment of the subject matter insured to be contemporaneous (Lloyd v Fleming).
    In relation to Section 51 MIA the cases of Powles v Innes and North of England Oil Cake Co v Achangel Maritime Insurance Co are of important consideration and application as in both cases, the assignor had no interest in the insured subject matter.

13. Rights of Assured In Whom Some Interest Remains

    Only an absolute transfer will allow for the assignee to act in it independently and without interference by the assignor (Hibbert v Carter).

14. Right Of Assignee Limited By The Assignment

    An assignee can only obtain the right as insured by the Assignor (Ionides v Harford).

15. Agreements To Transfer Insurance To Buyer Of Property

    Where the policy is assigned to the purchaser of the insured property, it is usual to indorse it in blank by signature without any memorandum. This kind of an indorsement operates to assign the policy and all claims on it to the holder of the policy (Ralli v Universal Marine Insurance Co and Landauer v Asser).

16. Assignment Under Section 136 Of The Law Of Property Act 1925

    Section 136 Law of Property Act 1925 provides that:-

    1. 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 thing 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 claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—
       1. the legal right to such debt or thing in action;
       2. all legal and other remedies for the same; and
       3. the power to give a good discharge for the same without the concurrence of the assignor:

       Provided that, if the debtor, trustee or other person liable in respect of such debt or thing in action has notice—

       1. that the assignment is disputed by the assignor or any person claiming under him; or
       2. of any other opposing or conflicting claims to such debt or thing in action; he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other thing in action into court under the provisions of the Trustee Act, 1925.
    2. This section does not affect the provisions of the Policies of Assurance Act, 1867.
    3. The county court has jurisdiction (including power to receive payment of money or securities into court) under the proviso to subsection (1) of this section where the amount or value of the debt or thing in action does not exceed
       Williams v Atlantic was confirmed in Raiffeisen in that a retention of part of the beneficial interest in the policy proceeds is not within the ambit of Section 136 Law of Property Act 1925.

17. Assignment In Equity

    Where the assignment is equitable, because the entire benefit of the insurance has not been assigned, the equitable assignee cannot bring an action against the insurer in his own name and as such must join the assignor to the proceedings so that the action can be brought in the assignor’s name. Nowadays all that is required is an unequivocal evidence of an intention to assign.
    The principle is that equity regards as done that which ought to be done, so as promise to assign takes effect as an assignment as soon as consideration has passed to the assignor and if the assignment is of future claim then the claim is to be treated as having been assigned as soon as it occurs (Raiffeisen Zentralbank Osterreich v Five Star General Trading LLC).An equitable assignment is subject to equities, so that the assignee must sue subject to all rights of defences that may be set up against the assignor as nominal claimant (Gibson v Winter).

If you have any questions or require any additional information, please contact our lawyer that you usually deal with.

This article is written by our Principal Associate, Chakaravarthi