After the completion of the contract, no material alteration can be made in its terms except by mutual consent. Any such alteration must also, since the policy is a written instrument, be made in writing. It is usually made by an indorsement upon the policy, but may be contained in a separate memorandum. The consent to the alteration need not be in writing. A verbal consent is sufficient. The policy may, however, contain an express stipulation prescribing the manner in which and the person by whom any alteration in the terms of the policy may be made.
Where the alteration is comprised in a separate document, a failure by the assured to prove the consent of the insurers to the alteration does not preclude him from recovering on the original contract as expressed in the policy. Where, however, the policy itself is altered, his failure to prove their consent to the alteration may preclude him from enforcing even the original contract.
1. Methods of alteration
A. policy may be altered in one or other of the following ways:
a. By the insertion of words into any part of the policy, whether by filling in blanks or by interlineations;
b. By striking out words, with or without the substitution of different words;
c. By defacing the policy, or, if it is under seal, by tearing off the seal.
2. The right of the insurer to avoid the contract
In order for the insurer to be able to avoid the contract two conditions must be fulfilled:/
a. The alteration must be in a material particular.
b. The alteration must be made by the assured, or by a stranger whilst the policy is in the possession or control of the assured.
(a) The alteration must be in a material particular
The alteration must be in a material particular, i e the effect of the policy, either from a legal or from a business point of view, must be altered so as to make it a different instrument from what it was when executed by the insurers. A correction of an obvious mistake, or the insertion of a term already implied from the words actually used, is not a material alteration.
In considering whether an alteration is material, its effect must be considered as at the time when it was made. If it was material then, the fact that it afterwards became immaterial is to be disregarded.
(b) The policy must at the time of the alteration be in the possession or under the control of the assured
The alteration must be made by the assured, or by a stranger whilst the policy is in the possession or control of the assured.
The fact that the alteration is made or assented to by an agent of the insurers does not prevent it from invalidating the policy in the hands of the assured, if made without their express sanction, except in the following cases:
i. Where the agent has authority, express or implied, to make such an alteration or to assent to it; or
ii. Where the insurers are precluded from relying on the alteration as avoiding the policy, by reason of their having received premiums from the assured after they are, or must be taken to be, aware of the alteration; or
iii. Where the alteration has been made before delivery of the policy to the assured, and he was not aware that the alteration was not, in fact, the alteration of the insurers themselves, or that it was not authorized by them.
If the alteration, though material, is made by the insurers themselves without the consent of the assured, or by a stranger, whilst the policy is not in the possession or control of the assured, its validity is not affected by such alteration, and the assured can enforce it according to its original tenor.