16 July 2012
As you know, the section wrote to Vero, IAG and Southern Response last week, to clarify the insurers’ approach to the assignment of claim entitlements in a property sale. We are aware of an emerging practice where some insurers allow assignment of the right to repair but exclude the right to rebuild. The issue was highlighted in the media last Friday.
Vero has responded to our letter in the following terms:
An insurance policy itself is not assignable either at common law or under the terms of our domestic policies. Vero considers on a case by case basis whether we can provide new cover to the purchaser of a property we currently insure and if so on what terms.
While insurance claims are assignable where a property is sold (in contrast to the policy itself which is not), in most situations claims lodged by the previous owner (but not settled at the time of the sale) are then cash settled with an assignee on an indemnity basis. Commercial claims are considered on a case by case basis depending on the relevant policy wording and circumstances.
We inform customers or their authorised advisers of the above when enquiries about assignments are received by Vero. Once we are notified that an assignment has occurred we discuss with the assignee, their entitlements and the claim settlement process.
The applicable legal principles are considered in the attached Court of Appeal decision which discusses the way that insurance policy claims operate upon sale of a property and assignment of a claim. The applicable wording in that case was very similar to the domestic Vero wordings. In short:
• an insurance policy is a contract of personal indemnity for a particular insured
• the insurance policy names the insured and does not widen the definition of the insured to include assignees
• an assignment after the sale of a property does not make the purchaser the insured
• the right under the policy to reimbursement of the costs incurred in reinstating the damaged building is personal to the insured. If the insured sells the property this right is severed and the assignee is entitled to a cash settlement of the indemnity value as defined in the policy.
Benefits personal to an insured such as accommodation expenses normally attach to a contents policy and are not transferable and loss of rents claims under home policies are similarly personal to the insured and the benefits are not assignable.
The section contacted the insurers in order to clarify their approach. This clarification allows property lawyers to inform and advise their clients as best as possible. If you have any comments, please forward them to the Property Law Section Manager, Jennifer Chowaniec, at firstname.lastname@example.org.