Our prior post reported on the Fifth Circuit's certified question to the Louisiana Supreme Court regarding anti-assignment provisions in policies assigned to the State. Louisiana distributed funds from the "Road Home" program to Louisiana homeowners to repair uninsured and under-insured property damaged by hurricanes. Before funds were issued, the homeowners had to sign a "Limited Subrogation/Assignment Agreement" whereby any claims of future rights to reimbursement were assigned to the State. However, there was a one billion dollar projected shortfall in the Road Home program.
To remedy the situation, the State sued more than 200 insurance companies pursuant to the assignments to recover the funds granted under the Road Home program. The insurers moved to dismiss, arguing that the State's claims failed as a matter of law because anti-assignment clauses in the policies invalidated the purported assignments. The federal district court denied the motion to dismiss, holding that the contractual anti-assignment provisions did not bar post-loss assignments under Louisiana law.
The Fifth Circuit asked the Louisiana Supreme Court whether the anti-assignment provisions were valid. The Louisiana Supreme Court responded there was no public policy in Louisiana which precluded an anti-assignment clause from applying to post-loss assignments. The court warned, however, that the anti-assignment clause must clearly and unambiguously state that it applies to post-assignment losses.
Given this response, the Fifth Circuit determined in it was unable to resolve the parties' dispute on appeal. In Re: Katrina Canal Breaches Litigation, 2011 U.S. App. LEXIS 13169 (5th Cir. June 28, 2011). The district court's judgment denying the insurers' motion to dismiss was vacated and and the case was remanded for further proceedings.
Thanks to Damon Key blogging colleague Rebecca Copeland (http://www.recordonappeal.com/) for notice of this case.