This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 351.— Under one of the clauses found in policies issued by fire insurance companies in Canada, any transfer or assignment of the property insured, without the written consent of the company, renders the policy void. Does not this seriously affect the position of banks taking security under section 74? Schedule C is in express terms an assignment of the goods.
Answer.—The clause referred to would not apply to assignments under section 74.
The Supreme Court held in Peters v. Sovereign Fire Insurance Co. (1886), that such an assignment of the property as would render a policy void under this condition must be an absolute assignment of all the insured's interest therein, and that the clause in question is not to be read as forbidding the mortgaging of the property, where the insured retains an insurable interest. The case of an assignment under sec. 74 comes very clearly within the terms of this judgment, and if this is the only condition in the policy affecting the matter, notice of security given under sec. 74 need not be given.
In a later case, Salteria v. Citizens Ins. Co. (1894), the condition in the policy reads as follows: " This policy shall not be assignable without the consent of the company. . . ;". all encumbrances effected by the insured must be notified within fifteen days thereof; in the event of any change in the title to the property insured the liability of the company shall thenceforth cease." A chattel mortgage covering the goods insured was afterwards given to a creditor, and in the chattel mortgage all policies upon the goods were assigned to the mortgagee. The court held that the policies were avoided by their transfer to the chattel mortgagee without the consent of the company, and also by the execution of the chattel mortgage which was held to constitute a "change of title " to the property. It was also held that want of notice of the chattel mortgage would, in view of the condition as to encumbrances, avoid the policy.
In the latest case, Torrop v. Imperial Fire Ins. Co. (1896) the clause on which the defence was rested made the policy void " if the said property should be sold or conveyed, or the interests of the parties therein changed." The Supreme Court of Canada held that a bill of sale which had been given, although not an absolute transfer of the property, was a change of interest which avoided the policy under this condition.
With such conditions in the policy as existed in the last two cases, the giving of security under sec. 74 without the consent of the company, would probably avoid the policy. It is to be remembered, however, that in almost every instance the loss, if any, under such policies is by their terms made payable to the bank holding the security, and under such circumstances no question could arise.
In so far as insurance contracts in Ontario are concerned, where the statutory conditions govern, security under sec. 74. would not contravene any of these, but in the other pro\inces it would depend entirely upon the particular language of the condition.
This was a point in the last mentioned case which is of general interest. After giving the bill of sale above mentioned the owner of the goods made a general assignment for the benefit of his creditors, by the terms of the assignment transferring to his assignee, among other things, all policies of insurance. The consent of the company to this assignment of the policies was not obtained, and this seems to have been regarded by the Supreme Court of Nova Scotia as a transfer in breach of the condition, which would have avoided the policy.