Can an insured assign the rights to payment under its insurance policy even though the policy includes a consent-to-assignment clause? The Vermont Supreme Court recently answered, yes. See In re Ambassador Ins. Co., 2008 Vt. LEXIS 108 (Vt. Aug. 14, 2008).
Ambassador issued two occurrence-based excess policies to Green Industries covering the periods 1982 to 1984. Each policy contained a consent-to-assignment clause that barred assignment of the policy unless the insurer consented. In 1983, Ambassador was placed in receivership. The superior court appointed a liquidator and ordered that any distributions be made pursuant to a statutory scheme setting priorities.
Green was sued in a number of asbestos-related cases in the 1980's and 1990's. By 2001, it appeared Ambassador's layer of coverage would be implicated. Because it faced financial distress due to its massive asbestos-related liabilities, Green assigned all right, claim, title, and interest to payment under the Ambassador policies to National Indemnity Company (NICO) in exchange for cash. NICO then submitted a claim to the liquidator for $20,000,000, the full amount due under the two policies. The liquidator refused to pay the full value of the policies because they were no longer policyholder claims.
NICO requested review by the superior court which held the assignment was invalid because permission had not been obtained from Ambassador or the liquidator as required under the consent-to-assignment clauses.
The Supreme Court of Vermont reversed. Although anti-assignment clauses were enforceable against attempted transfers of the policy itself before a loss has occurred, such a provision did not limit the policyholder's power to make an assignment of the rights under the policy, including the right to receive the proceeds of a policy, after a loss has occurred. Green assigned to NICO its payment rights under the policies, not the policies themselves. Further, when Green assigned its claims to NICO, the losses that triggered Ambassador's potential liability had already occurred. Although the exact amount of Ambassador's liability was not known because all of the suits against Green had not been reduced to distinct monetary awards, Ambassador's obligation to insure the risk had not been altered.
