Insurance Policy’s Anti-Assignment Clause Does Not Bar Assignment of Post-Loss Claim

Givaudan Fragrances Corp. v. Aetna Cas. & Surety Co., 227 N.J. 322 (2017).  Today’s opinion by Justice LaVecchia, a 6-0 ruling (Justice Albin did not participate) aligned New Jersey with the majority of jurisdictions on an issue of insurance law.  As the first sentence of the opinion states, the issue was “whether this state adheres to the rule that an anti-assignment clause in an insurance policy may not bar the assignment of a post-loss claim even though the claim has not been reduced to a money judgment.”  The Court held that New Jersey would adopt that rule.

As Justice LaVecchia noted, though the issue was one of first impression for the Court, a Law Division opinion and a ruling of the Appellate Division had both reached the result that the Court endorsed today.  Flint Frozen Foods, Inc. v. Firemen’s Ins. Co. of Newark, 12 N.J. Super. 396 (Law Div. 1951), rev’d on other grounds, 8 N.J. 606 (1952); Elat, Inc. v. Aetna Cas. & Surety Co., 280 N.J. Super. 62 (App. Div. 1995).  She “beg[a]n by crediting” those opinions.

Justice LaVecchia noted that the reasoning of those two cases “aligns with the overwhelming majority of jurisdictions that have, over the decades, spoken on the issue presented in the instant matter.”  She then went on to discuss those out-of-state cases exhaustively.  The Appellate Division in today’s case agreed with Flint, Elat, and the majority rule elsewhere, so today’s ruling was an affirmance of the Appellate Division.

Though Justice LaVecchia’s scholarly opinion is well worth reading in full, to make a (justifiably) long story short, the core of the rationale for the Court’s ruling was the idea that the purpose of an anti-assignment clause is “to protect the insurer from increased liability,” which could occur if an insured could assign a policy before a loss occurred.  Critical to the insurer is the identity of the insured, which implicates the likelihood of a loss and a claim under the policy.  If the insured could assign a policy to someone else, the insurer’s risk could increase without its consent.

But “after the events giving rise to the insurer’s liability have occurred, the insurer’s risk cannot be increased by a change in the insured’s identity.”  In those circumstances, “the rights of the insured to freely assign their claims” take precedence over any concern for the insurer, as Justice LaVecchia stated in rejecting the minority rule elsewhere.  The Court’s result today accords not only with cases in New Jersey and the majority of jurisdictions elsewhere, but also with the rule as stated in treatises such as Couch on Insurance, Appleman Insurance Law & Practice, and Williston on Contracts, all of which Justice LaVecchia quoted.

Having found that the anti-assignment clause did not bar the post-loss assignment, the Court easily rebuffed the insurer’s other arguments, including that the Court should carve out an exception for environmental contamination claims.  The opinion wisely adopted the sound majority rule, and removed any doubt as to where New Jersey stands on the issue of assignment of post-loss claims.