In 1999, Brae Burn Construction Company (“Brae Burn”) was hired to build a nursing home for Concierge Care Nursing Centers (“Concierge”). Brae Burn subcontracted with four vendors, each individually and independently insured by their respective insurance carriers. In August 2000, Brae Burn issued a Certificate of Substantial Completion, indicating that the building was complete. After Brae Burn issued the certificate, Concierge took possession and control of the newly-constructed nursing home.
A few years after taking possession of the nursing home, Concierge claimed that the building developed water leaks and mold. Concierge sued Brae Burn for the resulting damage to the building. In August 2006, Brae Burn and Concierge settled their lawsuit. As part of the settlement, Brae Burn assigned its claims against the subcontractors and their insurers to Concierge.
The insurers of the subcontracted vendors filed a lawsuit seeking a declaration that Concierge didi not have coverage under any of the relevant policies. A few days later, Concierge filed its claim against the subcontractors and their insurers. The insurers immediately filed a motion for summary judgment, asserting that any purported assignment to Concierge of Brae Burn’s claims against the Insurers was invalid under the anti-assignment provisions of the insurance policies.
In Nautilus Insurance Company v. Concierge Care Nursing Centers, Concierge argued that the insurers’ anti-assignment provisions do not apply because: (1) they do not apply to post-loss assignments; (2) do not apply absent a showing that the Insurer has been prejudiced by the assignment; and (3) do not apply because the insurers are prevented from asserting those provisions.
Ruling in favor of the insurers, Federal District Judge Nancy Atlas of the Southern District of Texas, Houston Division, relied on the recent Fifth Circuit decision in Keller Foundations, Inc. v. Wausau Underwriters Insurance Company, where they held that non-assignment clauses are enforceable in Texas “even for assignments made post-loss.” The Fifth Circuit in Keller Foundations also rejected the notion that the insurance company “must show prejudice in order to enforce the non-assignment clause.”
Judge Atlas was quick to point out that in the present case, the anti-assignment provisions of the insurance policies preclude assignment of Brae Burn’s rights to Concierge without first obtaining the written consent of the insurers. Because it was undisputed that there was never any written consent, Judge Atlas sided with the insurers.
So before you go off making deals involving an assignment of rights of any kind, it behooves you to determine whether you must satisfy some requirement in order to validate the assignment.
