## Facts

- Murray-Calloway County Hospital Corporation (the hospital) planned an addition to its facility and bought a builder’s-risk insurance policy from Assurance Company of America (Assurance) to cover property damage during construction.
- The policy included an anti-assignment provision stating that the hospital’s “rights and duties under this policy may not be transferred without” Assurance’s written consent (with an exception for death of an individual named insured).
- The hospital hired Wehr Constructors, Inc. (Wehr) to install concrete subsurfaces and vinyl flooring.
- After installation, some of the flooring and related work was damaged.
- The hospital submitted a claim to Assurance for losses exceeding $75,000, and Assurance denied the claim.
- Separately, Wehr and the hospital had a dispute concerning their rights and obligations under the construction contract; that dispute was resolved by settlement.
- As part of the settlement, the hospital assigned to Wehr all of the hospital’s claims and causes of action for insurance coverage and insurance proceeds against Assurance arising out of the builder’s-risk policy.
- It was undisputed that the flooring damage occurred before the hospital executed the assignment to Wehr.
- Wehr, as assignee, sued Assurance in the U.S. District Court for the Western District of Kentucky seeking payment under the policy.
- Assurance moved for judgment on the pleadings, arguing the assignment was ineffective because the hospital did not obtain Assurance’s written consent as required by the anti-assignment clause.
- The federal district court certified to the Kentucky Supreme Court the question whether, under Kentucky law, an anti-assignment clause requiring prior written consent is enforceable or applicable when the loss occurs before the assignment, or whether the clause is void as against public policy in that setting.

## Issues

1. Under Kentucky law, does an insurance policy’s anti-assignment clause requiring the insurer’s prior written consent bar assignment of a claim when the insured loss occurred before the assignment?
2. If the loss occurred before the assignment, is enforcing the consent-to-assignment clause void as against public policy?

## Decision

- The Kentucky Supreme Court held that, under Kentucky law, a policy provision requiring the insured to obtain the insurer’s prior written consent before assigning a claim for an insured loss is not enforceable or applicable when the covered loss occurs before the assignment.
- The court further held that, in the post-loss context, applying such a clause to prevent assignment of the accrued claim is void as against public policy.
- The court answered the certified question accordingly and returned the matter to the federal court for further proceedings consistent with that legal ruling.

## Legal Principles

- An anti-assignment clause may be effective to restrict a pre-loss transfer of an insurance policy when a transfer could affect the insurer’s accepted risk.
- Once an insured loss has occurred, the insured’s right to payment for that loss becomes an accrued claim (a chose in action) that is generally transferable.
- Because the insurer’s exposure for a given loss is fixed at the time of loss, a post-loss assignment changes only the identity of the claimant, not the nature or amount of the risk the insurer agreed to cover.
- Kentucky public policy disfavors contractual restraints on transferring accrued claims; therefore, a consent-to-assignment clause cannot be used to block assignment of a post-loss insurance claim.

## Conclusion

In *In re Wehr Constructors, Inc. v. Assurance Company of America*, the Kentucky Supreme Court held that an insurer cannot rely on a consent-to-assignment clause to defeat an assignment of an insurance claim made after the covered loss has already occurred, because the assignment transfers an accrued right to payment and the contractual restriction is void as applied in that post-loss setting.


In re Wehr Constructors, Inc. v. Assurance Company of America, 384 S.W.3d 680 (2012)