The Arizona Court of Appeals Division One holds that an insured may assign to a third party its post-loss benefits claim under an indemnity insurance policy without insurer consent, despite the presence of an anti-assignment provision in the policy.

Four homeowners retained a water damage mitigation specialist and restoration company for a covered loss under their homeowners’ insurance policies.  As part of their contracts with the company, the homeowners assigned their benefits under their homeowners’ insurance policies to the company.  Each of the policies contained an anti-assignment provision, which broadly required insurer consent before a claim could be assigned.  The insurer did not consent to the assignment.  The company sued the insurer after the insurer paid the company less than the invoiced total for the work performed, alleging breach of the homeowners’ insurance policies.  The insurer moved to dismiss, arguing that the company lacked any contractual relationship with the insurer and that the assignments were invalid under the anti-assignment provision in the homeowners’ insurance policies.  The superior court denied the insurer’s motion to dismiss, and the insurer petitioned the Court of Appeals for special action relief.

The Court of Appeals accepted special action jurisdiction but denied relief.  The Court observed that the general rule is that an indemnity insurance policy containing an anti-assignment provision cannot be assigned unless the insurer consents to the assignment.  This is because an insurer must be allowed to choose its insured for purposes of risk assessment.  A post-loss assignment, however, does not implicate the same policy considerations; at this point, the loss is fixed.  The insurer’s risk does not change due to the assignment.  The Court held that while an insured may not assign its policy without the insurer’s consent—which would affect the insurer’s risk pool—it may assign its post-loss benefits under the insurance policy without obtaining insurer consent.

Judge McMurdie authored the opinion; Judges Johnsen and Weinzweig concurred.