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sent to the transfer of the policy, and will be relieved of all further liability. The policy form usually provides two assignment blanks on the reverse side, which must be properly filled by the insured and insurer to effect an assignment.

ASSIGNMENT OF INTEREST BY INSURED

The interest of

covered by this policy is hereby assigned to subject to the consent of the

Date....

as owner of property

Company.

(Signature of the insured.)

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Assignment of the Policy when There Has Been a Transfer of the Property.-In discussing the legal nature of an assignment of a fire policy, it is essential to distinguish between those cases where there has been an actual transfer of the property and those where there has not. Thus where a policy is assigned to a mortgagee as his interest may appear, we have already seen that the mortgagee is not absolutely protected, because in law the mortgagor is still regarded as the owner of the property and the holder of the policy, and it is, therefore, his conduct which will control the validity of the policy. The policy may be valid at the time of assignment to the mortgagee, but may be rendered null and void thereafter by the mortgagor's improper conduct. Or, the mortgagor may already have violated the policy so as to make it void at the time of the assignment, in

which case he cannot convey to the mortgagee more than he himself possesses, and the mortgagee, as assignee, cannot receive more than the mortgagor was in a position to give. To overcome this obstacle, it has already been explained that it is the general practice of companies to protect the mortgagee by indorsing on the policy a special mortgagee clause which promises to indemnify him as his interest appears, and especially provides that he shall be protected against any act on the part of the mortgagor which may invalidate the insurance.1

Where, however, there has been an actual transfer of the title, and the policy has been assigned with the company's consent, it is the general rule to view the assignment as constituting a new and independent contract between the assignee and the company. The assignee will thus be protected against the acts of the original policy-holder, and this is true even though the company lacked knowledge of some improper conduct of the assignor with reference to the policy conditions. With the transfer of the policy by assignment, consented to by the company, the purchaser is considered by the courts to be protected in the same way as if the company had reissued to him a new policy, similar in all respects to the policy held by the person originally insured. Mr. Ostrander, in summarizing the various legal decisions which define the character of an assignment where there is a transfer of the property, gives the following explanation: "The assignment in such case has no other legal effect than to acquit the company as to the party first insured. This might be done in a different, and perhaps better, form, but the method chosen is sufficient to accomplish the object sought. It is a short, simple process to release the insurer as to one party, and bind it as to the other. In Continental Insurance Co. vs. Munns (120 Ind., 30; 22 N.E., 781) the

1 See Chapter on the "Mortgage Clause."

property had been mortgaged in violation of the conditions of the policy, which was subsequently assigned, on sale of the property, with the consent of the company, who had no knowledge of the forfeiture occasioned by this circumstance. The court said 'that the policy expires with the transfer of the estate, so far as it relates to the original holder; but the assignment and consent of the company constitute an independent contract with the assignee, the same in effect as if the policy had been reissued upon terms and conditions therein expressed. . . . The contract of insurance thus consummated arises directly between the purchaser and the insurance company, to all intents and purposes the same as if a new policy had been issued, embracing the terms of the old. In such a case no defense predicated on the supposed violations of conditions of the policy by the assignor will be available against the assignee.'"'1

Where the Policy is Assigned as Collateral Security for Loans.-Unless provided in the policy to the contrary it is the general rule that an assignment of the policy for collateral security will not invalidate the policy, even though this may have been done without the company's knowledge. The assignor continues to be the owner of the property and is still the insured, although the assignee has a lien on the insurance which will protect him in preference to other creditors.

Mention should here be made of the practice which many companies pursue of enabling a policy-holder to protect his creditors quickly with insurance. In many lines of business, for example, large quantities of produce, such as grain and cotton, are bought on borrowed funds, which must have as security not only the goods purchased, but also the promise of indemnity in case of loss through fire or marine disasters. Thus in the grain, cotton, and other produce

1 Ostrander on "Fire Insurance," pp. 502, 503.

markets it is customary to buy a quantity of the produce, immediately have it represented by warehouse receipts or bills of lading, and then to offer these, together with a fire policy in a responsible company, to a banker for a loan of about 90 per cent of the market value of the goods, and with the proceeds of the loan to effect a new purchase, again insure the same, and by offering the new warehouse receipts and the new fire policy as collateral security, effect a new loan. By repeating this operation, as we saw in the chapter on "The Functions of Fire Insurance," it becomes possible to transact a business from five to ten times the size that would be possible if all purchases were made on a cash basis. This method of buying on credit exists in all the leading produce markets, and in many instances the property purchased one day may be sold the next. The issuing of a new policy each time a purchase is made, or the assignment of the interest in the policy each time all, or a part, of the property is sold would certainly cause delay and inconvenience for all parties involved, and would prove a severe handicap to the smooth working of modern industrial machinery.

In view of these circumstances many companies make it possible for the insured to purchase a certain amount of insurance, and then to protect creditors by issuing against this insurance certificates properly countersigned by the designated representative of the company. One large marine-insurance company, for example, extends a privilege of this kind extensively to cotton dealers. Having secured a certain amount of insurance, a dealer, upon the purchase of cotton on borrowed funds, can immediately furnish his bank with the requisite amount of insurance, and the company will later acknowledge its liability by letter. The most general practice, however, is for the insured to issue a "certificate" properly countersigned, which certifies that he is the holder of a certain amount of insurance under a cer

tain policy, terminating at a certain date, and that any loss will be adjusted in conformity with the conditions of the policy, and made payable to the party designated therein as payee upon the surrender of the certificate. The following is one of the forms of such certificates:

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Loss, if any, in conformity with the conditions of said policy, to be adjusted with

of this certificate.

and payable to

only on presentation of and surrender

Countersigned at Philadelphia, this

day of

.......

19...

Manager

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