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Policy’s Anti-Assignment Provision Only Precludes Assignments Before Loss

A recent decision by Nassau County District Court Judge Scott Fairgrieve M.V.B. Collision Inc. v. State Farm Ins. Co., 2018 NY Slip Op 28043(Dist. Ct. Nassau Co. Feb. 20, 2018), provides a helpful survey of the case law on the enforceability of a policy provision prohibiting assignment or transfer of the insured’s rights under the policy.  As Judge Fairgrieve explains, the rule in New York is that such anti-assignment provisions are enforceable only as to assignments made before the insured sufferers a covered loss.  Thus, once the insured has a coverage claim, the right to collect that claim can generally be freely assigned or transferred, notwithstanding a policy provision prohibiting, or requiring the insurer's consent for, any assignments. A First Department decision cited by Judge Fairgrieve explains that “this principle is based on a judgment that while insurers have a legitimate interest in protecting themselves against additional liabilities that they did not contract to cover, once the insured against loss has occurred, there is no issue of an insurer having to insure against additional risk and, in that circumstance, the only question is who the insurer will pay for the loss.” Arrowood Indem. Co. v. Atlantic Mut. Ins. Co., 96 A.D.3d 693, 694 (1st Dep't 2012). Judge Fairgrieve also cites similar decisions from the Second and Third Departments and the federal courts.

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