Assignments of Insurance Rights: Kentucky Issues the Most Recent Policyholder Victory


Introduction -

In a recent decision, the Supreme Court of Kentucky has held that an anti-assignment clause in an insurance policy that requires the insured to obtain the insurer’s prior written consent before assigning a claim for an insured loss was neither applicable nor enforceable with respect to a claim for a covered loss that had already occurred at the time of assignment. In re Wehr Constructors, Inc. v. Assurance Company of America, --- S.W.3d ---, 2012-SC-0002221, 2012 WL 5285774, at *1 (Ken. Oct. 25, 2012).

In a victory for policyholders (and their assignees), Kentucky has now adopted the majority rule on this issue, joining courts in states such as New York, Illinois, Ohio and Delaware in holding that anti-assignment clauses would not be enforced against post-loss assignments. Following the reasoning of many courts before it, the Kentucky court held that enforcement of an anti-assignment clause under such circumstances constitutes an undue restraint on the alienation of a property right (i.e., policyholder’s chose in action) in violation of long-standing public policy.

The Wehr Constructors Decision -

In Wehr Constructors, Murray Calloway County Hospital (“Hospital”) had purchased a builder’s risk insurance policy from Assurance Company of America (“Assurance”) in connection with a planned addition to its facilities. The builder’s risk policy included the following anti-assignment clause...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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