Policyholder can assign benefits without consent

Patrick Bracher from Norton Rose Fulbright.

A Florida appeals court held that a homeowner could assign the benefits under her insurance policy to an emergency water mitigation company without the insurer’s consent. According to the property policy “assignment of this policy will not be valid unless we give our written consent”.

After the insured house was flooded the policyholder hired the plaintiff to perform emergency water removal and construction services and in exchange assigned to the services company “any and all insurance rights, benefits and proceeds” relating to the services provided. When the water mitigation company sued the insurer for the policy benefits arising from the flood, the insurer challenged the cession for lack of its consent. The court held that the wording did not restrict the cession to the benefits only after a loss had occurred. The plain language of the policy prohibited the insured’s unilateral assignment of the entire policy and not a cession of the financial benefits derived from that policy.

The law in South Africa is similar. A policyholder cannot transfer all rights and obligations under a policy without the insurer’s consent because there is a personal relationship between insurer and insured. A pure money debt can be ceded without the consent of the other party. It is common for the right to the proceeds of a policy to be transferred to a third party, for instance in lending transactions. The person acquiring the ceded rights has no greater rights against the insurer to recover the money than the insured person has. These rights to cede policies and benefits can be limited or prohibited by the terms of the policy.

(Bioscience West Inc. v Gulfstream Property and Casualty Insurance Co., case number 2D14-3946, in the District Court of Appeal of Florida, Second District)

First published by Financial Institutions Legal Snapshot.