Can An Insurance Company Prevent An Assignment Of Benefits?
Historically, Florida common law has allowed parties to assign their contractual rights to third parties. There are some exceptions–such as agreements involving personal service obligations or that otherwise violate public policy–but generally speaking, one party cannot prohibit the other from assigning their rights under a contract. And although Florida statutes state that a contract for insurance “may be assignable, or not assignable, as provided by its terms,” courts have long held that an insurer cannot demand consent before allowing a policyholder to assign insurance benefits to a third party.
Judge: Insurer Cannot Require Consent for Assignment of Post-Loss Claims
A recent decision by a federal judge in Fort Myers, Florida, Sabran v. Rockhill Insurance Company, illustrates the difficulties faced by insurance companies in attempting to enforce restrictions on assigning policy benefits. This case revolved around a Florida property damaged by Hurricane Irma in 2017. The property owner, a limited liability company (LLC), filed a claim with its insurance carrier. The insurer denied the claim in 2019.
Over a year later, in 2020, the LLC sold the property to a couple, who are the plaintiffs in this lawsuit. At the time of the sale, the LLC also assigned its disputed insurance claim related to Hurricane Irma to the plaintiffs. After the sale closed, the plaintiffs then filed a second claim, which the insurer again denied.
The plaintiffs ultimately sued the insurance company for breach of contract. The insurance company moved to dismiss the case. The insurer argued that the plaintiffs lacked standing as they had not suffered any injury–and more to the point, the policy contained an “anti-transfer clause” that barred the LLC from assigning its rights to a third party.
A federal judge rejected the insurance company’s defenses on this issue. The judge acknowledged that the language of the policy stated the LLC’s “rights and duties under this policy may not be transferred” without the insurance company’s “written consent.” But this clause was unenforceable under Florida law. As noted above, Florida common law has long protected the rights of insured parties to assign their benefits after a loss without first seeking the insurer’s consent.
And even if the anti-transfer clause was enforceable, the judge went on to explain that the language used in the policy only forbade “the transfer of the entire insurance policy, not a post-loss benefit under the policy,” or for that matter the transfer of the LLC’s rights without obtaining the insurer’s consent. Here, the LLC did not, in fact, assign the entire policy. It only assigned its post-loss rights, i.e., the right to file a claim related to the Hurricane Irma damage.
Speak with a Florida Insurance Lawyer Today
Insurance companies have every right to hold policyholders to the strict language of a policy. But the same is true for insurers, who must also be aware of any statutory or common law restrictions imposed upon their policies. So if you are involved in a coverage-related dispute and need legal representation from a qualified Tampa insurance litigation attorney, contact HD Law Partners today.