Assignment of insurance benefits is a pretty boring aspect of insurance law. But, the topic came in handy for me this evening.
I just finished a claims practice training seminar with five of our firm’s newer attorneys in Reno, Nevada. Like many others this week, my flight to Newark cancelled. I am stuck on a "red eye" via Los Angeles.
Knowing that I needed to get some sleep on the flight, I knew exactly what to do – research insurance law.
A recent decision, City Center West v. American Modern Home Insurance,1 reiterated the majority view that assignments of insurance proceeds after a loss are valid despite a policy provision preventing an assignment of the policy:
We do not agree with American Modern that the nonassignment provision precludes the assignment of a postloss claim under the Policy. American Modern argues that the term Policy necessarily captures any rights that “flow directly from the policy and would not exist absent the policy.” But the weight of authority is that assignment of a postloss claim under an insurance policy is not an assignment of the policy. A leading treatise states: “[T]he great majority of courts adhere to the rule that general stipulations in policies prohibiting assignments of the policy, except with the consent of the insurer, apply only to assignments before loss, and do not prevent an assignment after loss….” 3 Steven Plitt et al., Couch on Insurance § 35:8 (3d ed.2013); see, e.g., In re Katrina Canal Breaches Litig., 63 So.3d 955, 963 (La.2011) (“Post-loss assignment of claims arising under the policy is not equivalent to the assignment of the policy itself….”); Windey v. N. Star Farmers Mut. Ins. Co., 43 N.W.2d 99, 102 (Minn.1950) ( “Assignment, after loss, of the proceeds of insurance does not constitute an assignment of the policy, but only of a claim or right of action on the policy.”).
Who needs sleeping pills when insurance case law is available on the Internet?