INSURED PARTY UNDER THE INSURANCE POLICY

QUESTION

Hi,

Please find my below query:

As per ISBP 745 para K20(b):

When a credit requires an insurance document to be issued “to order of (named entity)” the document need not indicate “to order” provided that the named entity is shown as the insured party or claims are payable to it, and assignment by endorsement is not expressly prohibited”.

From the above para, I have two questions to ask you.

1.When the insurance certificate evidences Assured: ABC India Ltd(Beneficiary) and also indicated as “Claims Payable to: XYZ Bank, Melbourne) on the face of the document itself, whether the insurance certificate requires have endorsement to the order of XYZ Bank, Melbourne with reference to stanza marked in yellow in K20 above.? Please clarify “…….as the insured party or claims are payable to it”

2.When the insurance certificate does not evidence assured party(which we will be considered as bearer document as per para ) which normally don’t have endorsement and indicates that ” assignment by endorsement is prohibited”, will the insurance certificate is acceptable with reference to stanza marked in blue in K20b above?

Please opine your kind comments related about my query and please upload my query along with your comments into your new blog so that other can view this.

Wishing you most and more…..

Regards
Vijay
———-

ANSWER

Hi Vijay,

I would like to answer your questions as follows:

1) In my opinion, notwithstanding that the statement “claims payable to XYZ Bank, Melbourne” appears on the face of the insurance certificate, ABC India Ltd (as the insured party stated on the insurance certificate) is required to endorse the insurance certificate so that XYZ Bank, Melbourne becomes the beneficiary of the insurance certificate. Endorsement in blank or (to order of) XYZ Bank, Melbourne is acceptable.

I think LC should not require insurance document to indicate in the field headed “insured party” as “Claims payable to, e.g., XYZ Bank, Melbourne”. The requirement should be more specific, e.g., Insurance certificate to show XYZ Bank, Melbourne as the insured party or to be endorsed to XYZ Bank, Melbourne.

However, where an LC so required, it is acceptable for the insurance document to be issued in assignable form and to show:

– Insured party: XYZ Bank, Melbourne as the assured party (no endorsement); or
– Insured party: Beneficiary’s name, including on the face the statement “Claims payable to, e.g., XYZ Bank, Melbourne” and duly endorsed (endorsed in blank or to XYZ Bank, Melbourne).

From the angle of the document checker, it is also acceptable if the LC requires insurance document to show “Claims payable to XYZ Bank, Melbourne” and the insurance document so indicates in the field headed “Insured party” (as this complies with LC requirement). Of course, provided that there’s no clause on the insurance document stating that assignment by endorsement is prohibited or wording of similar effect.

2) LC should not require insurance document to be issued “to bearer” as according to insurance acts of some countries, insurance document must specify the name of the insured party. However, according to ICC, insurance document issued to bearer is acceptable.

Regarding insurance document issued “to bearer”, ICC opined in R322 that a document issued “to bearer” has the same effect as transfer of title by endorsement as the holder (presenter of the document to the claims settling agent would be classified as the assured party).

An insurance document issued to bearer need not be endorsed. So, in my opinion, the clause “assignment by endorsement is prohibited” in the document does not seem to affect the bearer’s right to claim under the insurance document.

Enjoy your nice weekend, Vijay.

Kind regards,
Mr. Old Man
———-
COMMENT

Hi Nguyen,

Thank you so much for your reply.

The reply to my query is really superb and I realized that we have to read the paras of ISBP in conjunction not in isolation.

Please upload my query and your answer about insurance certificate in your blog so that other can view to it.

I will back to you with similar kind of question in due course.

Wishing you most and more…..

Regards
Vijay