In Mallard Gutter Co. v. Farm Bureau Property and Casualty Insurance Co., 295 Neb. 419, 2016 WL 7486374 (filed 12/30/16), the insured’s home was damaged by a storm. In order to repair the storm damage, the insured brought in a roofing company, Millard Roofing and Gutter (Millard) to repair the roof. Millard believed that a complete roof replacement was required. At some point the insured signed an “Assignment of Claims” form presented by Millard, which assigned to Millard “any and all claims or moneys due or to become due” to the insured from the insurer, Farm Bureau Property and Casualty Co. Farm Bureau believed only two slopes of the roof needed to be replaced. The insured proceeded to replace the entire roof and then assigned to Millard “any and all claims or monies due or to become due” under the insured’s homeowners policy. However, the homeowner policy contained a standard non-assignment clause which required Farm Bureau’s consent to any assignment of policy benefits. Prior to the assignment, the insured had not obtained Farm Bureau’s written consent to the assignment. When Farm Bureau refused to pay the roofing contractor, the roofing contractor sued Farm Bureau based upon the assignment.
The Nebraska Supreme Court rejected Farm Bureau’s anti-assignment arguments, noting that more than a century prior the Nebraska Supreme Court had upheld an assignment of a fire insurance policy where the assignment of the claim occurred after the loss had occurred. See Star Union Lumber Co. v. Finney, 35 Neb. 214, 52 N.W. 1113 (1892). In fact, the Nebraska Supreme Court also noted in permitting the assignment in the current case that a majority of courts around the country had allowed assignments after the loss had occurred, despite anti-assignment clauses in the insurance policies. A distinction existed between assignment of the policy itself before a loss arose and the assignment of the right to receive proceeds after the loss occurred. In the former situation, anti-assignment clauses were strictly enforced because that type of assignment involved a transfer of the contractual relationship and would materially increase the risk to the insurer. In the latter situation, assignments were allowed based upon the reasoning that once a loss has occurred, an assignment of the policyholder’s rights regarding that particular loss in no way materially increases the risk to the insurer. After a loss occurred, the indemnity policy was no longer an executory contract of insurance. After the loss it was a vested claim against the insurer and could be freely assigned or sold like any other chose in action or piece of property.
The court discussed the competing public policy of favoring the free alienability of a chose-in-action and the very strong policy favoring freedom of contract. However, it was the function of the Legislature, through statutory enactments, to declare what is the law and public policy of the state. Nebraska had no statute concerning the enforceability of a non-assignment clause in a property insurance policy when the assignment is made after the loss. Farm Bureau made no attempt to explain why the clause should be enforced post-loss.