Louisiana High Court Answers Certified Question Regarding Post-Loss Assignment

NEW ORLEANS - (Mealey's) The Louisiana Supreme Court on May 10 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 (In Re:  Katrina Canal Breaches Litigation, No. 2010-CQ-1823, La. Sup.).

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, which provided grants of up to $150,000 to Louisiana homeowners to repair uninsured or underinsured property damage. 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 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 District Court denied the insurers' motion for reconsideration.  The insurers appealed to the Fifth Circuit U.S. Court of Appeals, which certified 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 "there is no public policy in Louisiana to prevent parties from contractually prohibiting post-loss assignments." 

"Nothing in the facts of this case support a finding that the non-assignment clauses contained in the policies have a deleterious effect on the public or that they violate public policy.  Further, public policy determinations are better suited to the legislative, rather than the judicial forum (citations omitted).  Thus, if any exception to [Louisiana Civil Code]  Article 2653 should be created relative to post-loss assignments, it is up to the legislature to create such an exception," the high court said.  

The high court added that the policy language "must clearly and unambiguously express that the non-assignment clause applies to post-loss assignments" and, therefore, must be evaluated by the district court on a policy-by-policy basis.  

[Editor's Note:  Full coverage will be in the May 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 #51-110512-019Z.  For all of your legal news needs, please visit] 

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