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Report No. 190 Final recommendations of the Law Commission in regard to Section 38 6.1.18 The final recommendations of the Law Commission in regard to section 38 may be summarised as under: (a) Sub-section (7) of section 38 should be retained, with some modification for the purpose of greater clarity. (b) The contingencies under which an assignment or transfer would be treated as a conditional one to be clearly spelt out. The provision be amended to indicate that except where the endorsement of assignment or transfer expressly indicates that the assignment or transfer is conditional in terms of section 38(7), every assignment or transfer will be deemed to be an absolute assignment or transfer and the assignee or transferee as the case may be, will be deemed to be absolute assignee or transferee respectively. (c) Both terminologies, viz., assignment and transfer be retained in section 38 and they be used in the alternative to enable greater flexibility in the working of these provisions. (d) A separate sub-section be inserted to indicate that in case of partial assignment or transfer of a policy of insurance, the liability of the insurer shall be limited to the amount secured by the partial assignment or transfer and such policy holder shall not be entitled to further assign or transfer the residual amount payable under the same policy. (e) The provision should be appropriately amended to extend its applicability to all personal lines of non-life insurance business as well. (f) The provision be amended to build in certain safeguards. The policy holder will have to disclose reasons for the assignment, the antecedents of the assignee and the exact terms on which the assignment is being made. There will be an obligation upon the insurer to get the credentials of the assignee verified at the cost of the insured. If the insurer is not satisfied that the assignment is bona fide, there would be an option to decline to register the assignment or transfer upon reasons in writing to be communicated to the policyholder subject to such decision being challenged by way of petition before the Grievance Redressal Authority.    |
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