5th Circuit Panel Unable To Resolve Dispute Over Hurricane Post-Loss Assignments

NEW ORLEANS - (Mealey's) In light of the Louisiana Supreme Court's May 10 answer to a certified question regarding post-loss assignments, the Fifth Circuit U.S. Court of Appeals on June 28 found that it is unable to resolve an appeal by more than 200 insurers challenging approximately 151,000 homeowners' Hurricane Katrina and/or Rita claims based upon their assignments of policy rights to the State of Louisiana, vacating and remanding a lower federal court's ruling denying the insurers motion to dismiss (In Re:  Katrina Canal Breaches Litigation, No. 09-30485, 5th Cir.; 2011 U.S. App. LEXIS 13169).


The State of Louisiana sued insurers that wrote property insurance in Louisiana at the time of Hurricane Katrina and/or Hurricane Rita in the Orleans Parish Civil District Court, seeking to recover the funds spent and anticipated to be spent under the Road Home program. The state also sought a declaration of the insurers' duties under the "all risk" policies they had issued to applicants of the state-required Road Home program. 

The insurers removed the case to the U.S. District Court for the Eastern District of Louisiana and moved to dismiss.  The insurers argued that "anti-assignment clauses in the homeowners policies invalidated the purported assignments to the State" and "the State's claims are time-barred by the contractual suit limitation period in the policies if the insured did not sue the insurer or the State did not obtain an assignment within two years of the loss." 

The District Court denied the insurers' motion to dismiss, finding that the contractual anti-assignment provisions did not bar post-loss assignments under state law.  The District Court further found that the state's filing of the putative class action lawsuit tolled the policies' contractual suit limitation periods.  The insurers appealed to the Fifth Circuit. 

The panel concluded that the Louisiana Supreme Court has not answered the question of whether a contractual prohibition on post-loss assignments violates public policy, certifying the following question to the Louisiana Supreme Court:  "Does an anti-assignment clause in a homeowner's insurance policy, which by its plain terms purports to bar any assignment of the policy or an interest therein without the insurer's consent, bar an insured's post-loss assignment of the insured's claims under the policy when such an assignment transfers contractual obligations, not just the right to money due?" 

Justice Bernette J. Johnson wrote for the high court, which found that although there is no Louisiana public policy that precludes an anti-assignment clause from applying to post-loss assignments, the language of the anti-assignment clause must clearly and unambiguously express that it applies to post-loss assignments and, therefore, must be evaluated on a policy-by-policy basis. 

The Fifth Circuit panel concluded that "[i]n light of the Louisiana Supreme Court's decision, we are unable to resolve the parties' dispute in this appeal, and the statute of limitations issues.  We VACATE the district court's judgment and REMAND for further proceedings consistent herewith."

Chief Judge Edith H. Jones wrote the opinion, which was joined by Judge Edward C. Prado and U.S. Judge Reed O'Connor of the Northern District of Texas, sitting by designation. 

[Editor's Note:  Full coverage will be in the July issue of Mealey's Litigation Report: Catastrophic Loss.  In the meantime, the opinion is available at or by calling the Customer Support Department at 1-800-833-9844.  Document #51-110714-007Z.  For all of your legal news needs, please visit] 

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