Following recent Fifth Circuit precedent, the federal district court ruled that the assignment made after the loss without the insurers consent was invalid. See Nautilus Ins. Co. v. Concierge Care Nursing Centers, Inc., 2010 U.S. Dist. LEXIS 136842 (S. D. Tex. Dec 28, 2010).
In 1999, Brae Burn Construction Company Inc. entered into a contract to build a skilled nursing facility for Concierge. Brae Burn had several subcontractors who were insured by their own insurers. In August 2000, Concierge took possession of the building.
Thereafter, Concierge sued Brae Burn for alleged damage to the building, including water leaks and mold. In August 2008, Concierge and Brae Burn settled for $3 million. As part of the settlement, Brae Burn assigned its claims against the subcontractor's insurers.
The insurers filed suit for a declaratory judgment seeking to establish that Concierge did not have coverage under any of the relevant policies. The insurers movedfor summary judgment arguing that any purported assignment of Brae Burn's claims against the insurers was invalid under the anti-assignment provisions of the policies. These provisions barred assignment of any rights and duties under the policy without the insurer's written consent.
Concierge argued that the anti-assignment provisons did not apply to post-loss assignments. The court disagreed, determining that the Fifth Circuit's decision in Keller Found., Inc. v. Wausau Underwriters Ins. Co. [post here] held that non-assignment clauses were enforceable in Texas even for assignments made post-loss. The Fifth Circuit rejected the argument that the insurance company must show prejudice in order to enforce the anti-assignment clause.
Here, the anti-assignment provisions of the policies precluded assignment of Brae Burn's rights to Concierge absent written consent of the insurers. Because there was no written consent, there were no valid assignments.
