Change of Interest In The Thing Insured

Section 20. Except in the cases specified in the next four sections, and in the cases of life, accident and health insurance, a change of interest in any part of a thing insured, unaccompanied by a corresponding change of interest in the insurance, suspends the insurance to an equivalent extent, until the interests in the thing and the interest in the insurance are vested in the same person.

What is the general rule embodied in this section?

The General Rule is that the mere transfer of the thing insured does not transfer the policy but suspends it until the same person becomes the owner of both the policy and the thing insured.  The term “change of interest” in this section means absolute transfer of the property insured such as the conveyance of the property insured by means of an absolute deed of sale.

What are the exceptions to the general rule?

The exceptions, where a change of interest does NOT suspend the insurance are:

1.       Life, health and accident insurance (Sec. 20)

2.       Change of interest in the thing insured occurs after the injury which results in a loss (Sec. 21)

3.       Change of interest in one or more of several things separately insured by one policy (Sec. 22)

4.       Change of interest by will or succession on the death of the insured (Sec. 23)

5.       Transfer of interest by one of several partners, joint owners or owners in common who are jointly insured, to the other (Sec. 24)

What is the reason for this provision suspending the insurance in case of change of interest?

The object of the provision is to provide against changes which might supply a motive to destroy the property, or might lessen the interest of the insurer in protecting and guarding it.