I’m currently on a flight to Cincinnati and felt that it would be a perfect time for a new post in my series on Assignment of Benefits (“AOB”) tackling this issue in Ohio.
In Pilkington North America, Inc. v. Travelers Casualty & Surety Company, et al.,1 the Supreme Court of Ohio addresses the two questions that we are consistently looking at concerning AOBs and whether they are applicable in any particular state. They are: 1) whether contract rights are assignable; and 2) whether anti-assignment clauses in insurance policies are enforceable.
Concerning the first question, the court stated:
It is long-standing tradition in the common law that all contract rights may be assigned except under three conditions. [] First, if there is clear contractual language prohibiting assignment, an assignment will not be enforced. [] Second, an assignment must not materially change the duty of the obligor, materially increase the insurer’s burden or risk under the contract, materially impair the insurer’s chance of securing a return on performance, or materially reduce the contract’s value. [] Third, the assignment will not be valid if it is forbidden by statute or by public policy.
This leads us to the second question, whether the anti-assignment clauses contained in an insurance policy will void the AOB. The court reviewed case law and history across the country. The court noted that under the “plain language” rules of insurance policy examination, the anti-assignment clauses should be valid and enforceable, however, the court stated:
Insurance contracts receive unique treatment post-loss, however. Insurance policies are generally construed such that assignment of an interest is valid after the occurrence of the loss insured against, and the assignment is then regarded as a transfer of the chose in action, even in the face of an anti-assignment provision.
The court ultimately held, “that the chose in action [] is unaffected by the anti-assignment provision when the covered loss has already occurred.” This means that so long as the assignment takes place post-loss, it will be valid regardless of an anti-assignment clause in the policy.
If you have any specific questions on AOBs or would like to see your state come up sooner, please comment below, or send me an email at cmathis@merlinlawgroup.com.
As always, I’ll leave you with a (mildly) related tune, here’s Ohio’s own, Nine Inch Nails with, Hurt:
https://www.youtube.com/watch?v=kPz21cDK7dg
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1 Pilkington N. Am., Inc. v. Travelers Cas. & Sur. Co., 112 Ohio St.3d 482, 488-89 (2006) (internal citations omitted).
