Anti-Assignment Clauses In Insurance Policies

The subject of anti-assignment clauses was discussed in an article published in the State Bar of Texas, Insurance Section, Journal.  The article is titled “Texas Law And The Restatement Of The Law Of Liability Insurance: An Initial Comparison Of Blackletter Principles.”

The article is lengthy and a good read for lawyers dealing with this area of the law.  One page of the article deals with anti-assignment clauses.  It tells us this.

A 1994, Fort Worth Court of Appeals opinion styled, Tex. Farmers Ins. Co. v. Gerdes, says that anti-assignment clauses have been consistently enforced by Texas courts.  Texas courts enforce anti-assignment clauses post-loss ad without requiring the insurer to show prejudice and this is reinforced by the 2010, U.S. 5th Circuit opinion styled, Keller Foundations, Inc. v. Wausau Underwriters Ins. Co.  Thus, Texas courts will uphold anti-assignment provisions so long as they do not interfere with the operation of a statute.

The Restatement contains the following section regarding assignment clauses:

Section 36.  Assignment of Rights Under a Liability Insurance Policy

(1) Except as otherwise stated in this Section, rights under a liability insurance policy are subject to the ordinary rules regarding the assignment of contract rights.

(2) Rights of an insured under an insurance policy relating to a specific claim that has been made against the insured may be assigned without regard to an anti-assignment condition or other term in the policy restricting such assignments.

(3) Rights of an insured under an insurance policy relating to a class of claims or potential claims may be assigned without regard to an anti-assignment condition or other term in the policy restricting such assignments, if the following requirements are met:

  (a) The assignment accompanies the transfer of financial responsibility for the underlying liabilities insured under the policy as part of a sale of corporate assets or similar transaction;

  (b) The assignment takes place after the end of the policy period; and

  (c) The assignment of the rights does not materially increase the risk borne by the insurer.

As can be seen, assignment is one of the sections of the Restatement that takes a different approach to Texas courts that have addressed the issue.