/>iInsurance policies often incorporate assignment clauses, which require policyholders to obtain their insurers’ written consent before assigning their insurance policies to others. For example, the ISO Common Policy Conditions Form, which is often used in commercial liability insurance policies, including package policies, precludes policy assignments under Section F: “Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.” Professional liability policies also may prohibit assignment. The ISO standard management protection coverage form (ML 00 01 11 20) Section VII. B. “Assignment” requires the insurer’s consent for assignment: “No change in, modification of or assignment of interest under this Policy will be effective without our written consent.”
Insurers sometimes attempt to expand the scope of assignment clauses to preclude an insured’s assignment of a claim. Claims arise post-loss, of course, and assignment of a claim does not assign the insured’s policy to the assignee. Nevertheless, the Commissioner of the Maryland Insurance Administration, the Circuit Court of Baltimore County, and the Appellate Court of Maryland concluded that an assignment clause prohibited homeowners from assigning their claim for roof damage to a roofing contractor. The Commissioner and courts failed to distinguish between assignment of a policy and assignment of a claim, with the Maryland appellate court relying on two lower court cases interpreting different language in life and health care policies. Maryland’s highest court, the Supreme Court of Maryland, rejected this reasoning, distinguished the language in the purportedly conflicting authority, and reemphasized well-established law that permits assignment of a claim despite the presence of assignment clauses found in personal and commercial liability policies. (In re Matter of Featherfall Restoration, LLC, 2025 WL 2080932 at *6-7 (Md. July 24, 2025)).
The Travelers’ insurance policy in Featherfall incorporated the following assignment clause:
5. Assignment. Assignment of this policy will not be valid unless we give our written consent.
Featherfall at *1. The insureds assigned their roof claim to the contractor but did not assign their rights under the full policy:
Assignment of Claim: In consideration of work and services being rendered or to be rendered by Featherfall Restoration, LLC pursuant to the separately executed Work Authorization Agreement, as well as any change orders thereafter, I the undersigned Insured (“Assignor”) hereby irrevocably transfer, assign, and set over onto Featherfall Restoration, LLC (“Assignee”) any and all insurance rights, benefits, proceeds, and any causes of action under applicable insurance policies for the above mentioned claim. Id. at *6.
The Commissioner of the Maryland Insurance Administration rejected the clear distinction between assignment of the policy and assignment of a claim, as explained by the Supreme Court of Maryland:
The Commissioner determined that the anti-assignment clause prohibited the assignment of claims as well as the policy itself, which rendered the Assignment void. The Commissioner also determined that anti-assignment clauses are enforceable regardless of whether assignments occur preloss or post-loss, primarily relying on two cases that enforced anti-assignment clauses against post-loss assignments of claims[.] Id. at *2.
The Circuit Court of Baltimore County affirmed the Commissioner’s decision, as did the Appellate Court of Maryland. Maryland’s highest court looked through the court rulings and directly reviewed the Commissioner’s decision. The court concluded that the insureds assigned only their individual claim and not the policy, and that under well-established law, insureds may assign claims despite the presence of an “anti-assignment clause.” In its analysis, the court considered “[t]he distinction between a contract and a claim arising under it.” Id at *4.
Simply put, the Policyholders did not assign their rights to coverage for any loss other than the specific loss for which they hired Featherfall, a point that Travelers conceded at oral argument before this Court. Thus, the Assignment operated only to assign the Policyholders’ rights with respect to a specific claim, not the policy itself, and was therefore not prohibited by the policy’s anti-assignment clause. Id. at *7.
Travelers cited the prior Maryland cases Michaelson v. Sokolove, 182 A. 458 (Md. 1936), and Dwayne Clay, M.D., P.C. v. Government Employees Insurance Co.,739 A.2d 5 (Md. 1999), to argue that the assignment in Featherfall violated the policy’s assignment clause. However, the Supreme Court of Maryland distinguished these prior Maryland cases based on the terms of the assignment clauses. Specifically, Michaelson involved a life insurance policy that contained an assignment clause stating that “neither the supplementary contract nor any benefits accruing thereunder shall be transferable or subject to surrender, commutation, anticipation, or encumbrance” (Michaelson, 182 A. 458, 459). Similarly, in Clay the assignment clause stated that “[a]ssignment of interest under this policy will not bind us without our consent” (Clay, 739 A.2d 5, 7). Therefore, in contrast to the Travelers policy in Featherfall, those assignment clauses “prohibited the assignment of not only the policies but also any ‘benefits’ or ‘interest’ thereunder” (Featherfall at *7). These broader assignment provisions rendered Michaelson and Clay inapplicable:
Featherfall instead makes the argument that the assignees in Michaelson and Clay could not make—that the Assignment was not prohibited by the plain language of the anti-assignment clause. Thus, neither Michaelson nor Clay supports the notion that here, the anti-assignment clause prohibited the Assignment. Id.
Featherfall reinforces the importance of carefully worded claim assignments to avoid insurers’ improper reliance on assignment clauses to restrict insureds’ post-loss rights. Insureds seeking to assign claims should carefully review any governing assignment clauses and limit assignments to claims only. Attorneys drafting assignments should be mindful of the distinction between claims and policy assignments to preclude this insurer defense. When in doubt, consult coverage counsel to minimize disputes with insurers over claims assignments.
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Although insurance policies generally incorporate “assignment” provisions, courts and litigants alike often use the term “anti-assignment,” thus misinterpreting the purpose of assignment clauses, which permit assignment of insurance policies with the insurer’s consent.
