Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

A few years after taking possession of the nursing home, Concierge claimed that the building developed water leaks and mold. Concierge sued Brae Burn for the resulting damage to the building. In August 2006, Brae Burn and Concierge settled their lawsuit. As part of the settlement, Brae Burn assigned its claims against the subcontractors and their insurers to Concierge.

The insurers of the subcontracted vendors filed a lawsuit seeking a declaration that Concierge didi not have coverage under any of the relevant policies. A few days later, Concierge filed its claim against the subcontractors and their insurers. The insurers immediately filed a motion for summary judgment, asserting that any purported assignment to Concierge of Brae Burn’s claims against the Insurers was invalid under the anti-assignment provisions of the insurance policies.

In Nautilus Insurance Company v. Concierge Care Nursing Centers, Concierge argued that the insurers’ anti-assignment provisions do not apply because: (1) they do not apply to post-loss assignments; (2) do not apply absent a showing that the Insurer has been prejudiced by the assignment; and (3) do not apply because the insurers are prevented from asserting those provisions.

Ruling in favor of the insurers, Federal District Judge Nancy Atlas of the Southern District of Texas, Houston Division, relied on the recent Fifth Circuit decision in Keller Foundations, Inc. v. Wausau Underwriters Insurance Company, where they held that non-assignment clauses are enforceable in Texas “even for assignments made post-loss.” The Fifth Circuit in Keller Foundations also rejected the notion that the insurance company “must show prejudice in order to enforce the non-assignment clause.”

Judge Atlas was quick to point out that in the present case, the anti-assignment provisions of the insurance policies preclude assignment of Brae Burn’s rights to Concierge without first obtaining the written consent of the insurers. Because it was undisputed that there was never any written consent, Judge Atlas sided with the insurers.

So before you go off making deals involving an assignment of rights of any kind, it behooves you to determine whether you must satisfy some requirement in order to validate the assignment.

The general rule in Texas is that an insured cannot assign an insurance claim if the policy contains a non-assignment clause. See Hoffman v. St. Paul Guardian and Texas Farmers Ins. Co. v. Gerdes. However, Texas law does allow an insured to sell the right to a cause of action if a suit has been filed, even if the underlying contract cannot be assigned. See Pagosa Oil v. Marrs and Smith Partnership.

Texas Property Code Section 12.014(a) states:

A judgment or part of judgment of a court of record or an interest in a cause of action on which suit has been filed may be sold, regardless of whether the judgment or cause of action is assignable in law or equity, if the transfer is in writing.

Therefore, although insurance law does not allow you to assign your claim if your policy contains a non-assignment clause, Texas property law allows you to reach the same result by selling the cause of action in writing. Although I don’t know the attorney who discovered this workaround, if s/he’s reading this, we all thank you.