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Under Oregon Law, Anti-Assignment Clause Does Not Bar Post-Loss Assignments
Insurance Law Update
Ninth U.S. Circuit Court of Appeals
In Alexander Manufacturing, Inc. Employee Stock Ownership Plan and Trust v. Illinois Union Ins. Co., __ F.3d __, 2009 WL 764561 (9th Cir. (Or.) March 25, 2009), the Ninth U.S. Circuit Court of Appeals held that, under Oregon law, an anti-assignment clause does not apply to post-loss assignments of interest because the provision could reasonably be read to apply only to pre-loss assignments.
Defendant issued a directors and officers policy to plaintiff that also provided fiduciary liability coverage. The policy contained an anti-assignment clause that stated “[a]ssignment of interest under this [p]olicy shall not bind [i]nsurer unless their consent is endorsed hereon.”
Plaintiff sued three of its former fiduciaries and settled the claim for $1.3 million. In exchange for a covenant not to execute on the majority of the settlement, the fiduciaries assigned the rights to any claim against defendant to the plaintiff. In the subsequent action for breach of contract and breach of the implied covenant of good faith and fair dealing, the district court held that the anti-assignment clause precluded plaintiff from recovering, as its claim to the policy was based on an assignment from the fiduciaries.
On appeal, plaintiff argued that the anti-assignment clause did not apply to post-loss assignments because the provision was ambiguous because it did not clearly indicate whether it also applied to post-loss assignments. In support of its position, plaintiff cited Groce v. Fid. Gen. Ins. Co., 252 Or. 296 (1968), which held that a similarly worded provision only applied to pre-loss assignments. Defendant, on the other hand, cited to the more recent case of Holloway v. Republic Indem. Co. of Am., 341 Or. 642 (2006), which held that an anti-assignment clause reading “[y]our rights and duties under this policy may not be transferred without our written consent” clearly contemplated the inclusion of both pre-loss and post-loss assignments. The Ninth Circuit held that the clause’s reference to the word “interest” was ambiguous and on that basis reversed the district court’s ruling. The court distinguished the Holloway case by reasoning that the anti-assignment provisions at issue there contained distinct wording.
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