This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 348.— A mercantile house holds a policy of insurance covering goods in their possession, " their own or held in trust or on commission for which they are responsible in case of loss." The owner of certain goods stored with them takes their warehouse receipt for these goods, for the purpose of borrowing on the same, and they assign to him this policy of insurance with the written consent of the company. If he borrows on the warehouse receipt from a bank and makes the loss, if any, under the policy payable to it, would the bank's position as to the insurance be in order ?
Answer.—The transfer of the policy in the way described, if properly done, would, we think, make it a contract of insurance covering only the goods mentioned in the warehouse receipt, provided these are part of the goods which the policy originally covered, and the position of the owner and the bank would be the same as if the policy had been originally taken out by the owner, on his own goods alone. Under the wording quoted, the goods might have to be goods for the loss of which while stored with them the mercantile house would be responsible, to bring them within the policy.
While we think the case put by our correspondent is fully covered by this answer, we wish to say that in questions respecting fire insurance, very much depends upon the facts and the exact wording of the policies, endorsements, etc., and general questions may not describe these with sufficient exactness to ensure a correct reply.