Policyholders and their insurers have long disputed whether a policyholder can assign rights under an insurance policy to third-parties based on the following provision:
Assignment. Assignment of interest under this policy shall not bind [the insurer] until its consent is endorsed hereon.
This so-called “anti-assignment clause” is typically found in standard form general liability and property policies, and insurers claim that it limits a policyholder’s right to assignment:
The courts of several states, including Ohio and Florida, have limited the impact of this clause, finding that it does not bar post-loss assignments. See, e.g., Pilkington North America v. Travelers Casualty & Surety Co., 861 N.E.2d 121 (Ohio 2006) (finding post-loss assignment by policyholder to successor valid); West Florida Grocery Co. v. Teutonia Fire Ins. Co., 77 So. 209 (Fla. 1917) (“it is a well settled rule that the provision in a policy relative to the consent of the insurer to the transfer of an interest therein, does not apply to an assignment after loss”); Egger v. Gulf Insurance Co., 903 A.2d 1219 (PA 2006) (“‘An assignment of the policy or rights thereunder after the occurrence of the event, which creates the liability of the insurer, is not, therefore, precluded.’”); Conrad Brothers v. John Deere Insurance Co., 640 N.W.2d 231 (Iowa 2001) (anti-assignment clause in a property insurance policy only applied to pre-loss assignments / post-loss assignments valid). Thus, assuming that a policyholder assigns its rights after a loss occurs, the assignment is valid in many jurisdictions.
Recently, some property insurers in Florida have added a new twist to the transitional anti-assignment clause: instead of attempting to prohibit assignment of policy rights without their consent, the insurers are now attempting to prohibit assignment without the consent of several, additional parties. In Security First Insurance Company v. Florida Office of Insurance Regulation, the Florida’s Fifth District Court of Appeals considered an appeal related to the disapproval of new policy language proposed by SFIC. 232 So.3d 1157 (Fla. Dist. Ct. App. 2017). SFIC had sought approval of Florida’s Office of Insurance Regulation for the following provision in its property insurance policies:
No assignment of claim benefits, regardless of whether made before loss or after loss, shall be valid without the written consent of all “insureds,” “all additional insured,” and all mortgagee(s) named in this policy.
Id. at 1157 – 1158. The Office of Insurance Regulation disapproved of the new language, noting that it restricted “the assignment of post-loss claim benefits under the policy which is contrary to Florida law.” Id. Florida’s Fifth Circuit Court of Appeals agreed with the Office of Insurance Regulation’s assessment. The court traced Florida’s refusal to enforce bans on post-loss assignments to the Florida Supreme Court’s decision in West Florida Grocery Company v. Teutonia Fir Insurance Company, 77 So. 209, 210 - 2011 (Fla. 1917) wherein the court held that – even in 1917 – it was a “well settled rule that the consent of the insurer to the transfer…does not apply to an assignment after loss.” Security First, 232 So.3d at 1158. The Court of Appeals noted that under those cases, neither the Office of Insurance Regulation nor the hearing officer who heard the intermediate appeal interpreted Florida law on the issue in error and affirmed the disapproval of the provision. Id. at 1159.
And Florida’s Fifth District applied its decision in Security First just two months later in Restoration 1 CFL LLC v. Asi Preferred Insurance, Corp., 239 So.3d 747 (Fla. Dist. Ct. App. 2018). In Asi, the trial court had dismissed a suit brought by Restoration 1 as a post-loss assignee of Asi Preferred’s policyholder, finding that the assignment was barred because the policy contained a provision similar to that which was disapproved in Security First and the assignee had failed to obtain consent from the mortgage holder. Id at 747. Following Security First, the Asi court reversed, holding that the “clause improperly restricts the assignment of post-loss claim benefits, contrary to Florida law.” Id. at 747 – 748.
But Florida’s Fourth District Court of Appeals came to the opposite conclusion in Restoration 1 of Port St. Lucie v. Ark Royal Insurance Co., No. 4D17-1113, 2018 WL 4211750 (Fla. Dist. Ct. App. Sep. 5, 2018). There, Ark Royal insured its policyholder under a homeowners policy that contained a provision almost identical to that proposed by SFIC in Security First. Id. at *1. After the policyholder’s home sustained over $20,000 in water damage, she assigned her rights under the policy to Restoration 1 of Port St. Lucie, which repaired the damage in question. Restoration 1 submitted a claim to Ark Royal under the policy, which Ark Royal denied, citing the policyholder’s breach of the Security First-like anti-assignment provision.
In holding in favor of Ark Royal, the Fourth District Court noted a distinction between the anti-assignment clause found in West Florida Grocery and its progeny and the one considered by Security First: who had to consent to the assignment. In the former, the insurers’ consent was required. But in the latter, the insurers’ consent was irrelevant – only those parties with a potential interest in the proceeds of the policy (i.e. the policyholder and her mortgagee) had to consent. This distinction was enough for the court to hold that the condition applied, barring Restoration 1’s claim. Id. at *4.
The takeaway from Ark Royal and Security First is that Florida policyholders and those that do business with them should beware of entering into an agreement to assign policy rights as payment for services rendered, as the Fourth and Fifth District Courts have arrived at opposite outcomes. In short, a proper assignment in one part of Florida could be impermissible in the other. And outside the narrow context of property insurance and requirements of parties other than the insurer, neither Ark Royal nor Security First impacts the general post-loss assignability of insurance coverage rights.