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Assignment of Policy Is Not Valid Without Insurer Consent

Fire and Allied Lines	Transfer of Policy
Insurable Interest

The particulars of this case were complicated by merging of a church congregation with another church organization, the acquisition of a church building by the second organization, the conveyance of the building to a third and unrelated church organization, and a ten-year option for the second organization to repurchase if the premises ever ceased to be used for church services. The second organization assigned, in writing, the Fire policy that had been purchased on the building (by the first organization) to the third organization for a money consideration.

An agent of the insurer, on a visit to the church building, learned of the merger of the first organization into the second and of the sale of the property to the third. The building was badly damaged by fire ten days later. The insurer denied coverage, having had no knowledge of the transfer of the Fire policy until claim was made. The third church organization (the purported assignee of the Fire insurance) filed suit against the insurer.

The insurer defended on the contention that it had not been informed of the merger of the churches, that it did not agree to the continuation of the insurance by the successor (second) organization, and that the assignment of the policy to the third organization without the insurer’s consent was not binding upon it. Trial court verdict in favor of the insurance company was appealed.

The appeal court said that it could not ignore the provision on the front page of the policy providing that “Assignment of this policy shall not be valid except with the written consent of this Company.” It noted that the provision was legislatively mandated for use in all Fire insurance policies and not a self-protective clause conjured by the insurer. The visit of the company’s agent to the premises, when the company had constructive knowledge of the sale of the property, was of no consequence because a Fire policy “is a personal contract of indemnity, and is on the insured’s interest in the property, not on the property itself.” Since the insurer did not consent to the assignment of the policy by the second organization to the third, the latter had no rights under it.

With regard to claim that the second church organization might have under the policy as a result of the merger of the first into it, the court said that, even if it were assumed that it succeeded to all of the legal rights of the first organization, it did not have insurable interest in the property to allow it to recover under the policy. It conveyed the property to the third organization. The option to repurchase if the property were not used for church purposes did not, according to the court, amount to an insurable interest.

The court ruled that the assignee of the policy (the purchaser of the property) had no rights under the policy because there had not been compliance with the assignment provision. The surviving church organization in the merger arrangement had no claim under the policy because the mere option to repurchase did not give it an insurable interest.

Trial court judgment in favor of the insurance company was affirmed.

Christ Gospel Temple Et Al., Appellant V. Liberty Mutual Insurance Company, Appellee V. Presbyterian Church Of Harrisburg, Appellant. Pennsylvania Superior Court, Harrisburg District. No 242. December 21, 1979. CCH 1980 Fire and Casualty Cases 893.