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Lexington Ins. Co. v. Simkins Indus. - 704 So. 2d 1384 (Fla. 1998)

Rule:

Fla. Stat. Ann. § 627.422 expressly states that the terms of an insurance policy determine its assignability. 

Facts:

Respondent Simkins Industries, Inc. (Simkins) loaned WAK Limited, Inc. (WAK) approximately $ 5.5 million to finance WAK's ownership of the Monte Carlo Hotel on Miami Beach. In exchange for the funds, WAK executed various notes and mortgage and security agreements granting Simkins a security interest in the hotel, the land underneath it, and the personal property WAK used in connection with the hotel. WAK agreed to keep the hotel insured, assign all of the policies to Simkins, and direct all insurers to make payments to Simkins in the event of a loss. WAK procured a $ 2 million insurance policy with petitoiner Lexington Insurance Company (Lexington) which covered loss or damage to the building, business personal property, and business income. Simkins was named as the first mortgagee in the policy's standard loss payable clause. The hotel was damaged by fire in October 1993, and Simkins brought action for recovery because Lexington agreed to cover only the building and structural damage pursuant to the mortgage clause. Simkins argued that it is entitled to recover for lost business income and business personal property pursuant to two theories: (1) under the plain language of the Declarations page; and (2) under WAK's agreement to assign the policy to Simkins. The trial court did not address the second theory, but found that as mortgagee Simkins was entitled to recover only for property damage. The district court reversed under the second theory, concluding that Simkins was entitled to recover for loss of business income and damage to business personalty pursuant to its status as assignee. Thereafter the court certified a conflict regarding whether a mortgagee is entitled to recover as the assignee to an insurance policy obtained by the mortgagor if the policy contains a nonassignment clause. 

Issue:

Is a mortgagee entitled to recover as the assignee to an insurance policy obtained by the mortgagor, where the policy contains a nonassignment clause?

Answer:

No

Conclusion:

The Supreme Court of Florida quashed the appellate decision and remanded the case for further proceedings because the express language of the policy prohibiting assignments and on Fla. Stat. Ann. § 627.422, which expressly states that the terms of an insurance policy determine its assignability, was determinative of the issue. The Court explained that the purpose of a provision prohibiting assignment is simple--to protect an insurer against unbargained-for risks. In the present case, if Simkins is permitted to recover pursuant to the assignment theory as the district court suggests, the purpose would be frustrated in light of Lexington's arson defense against WAK. Accordingly, based on the unambiguous language of the statute and the policy, the Court hold that the policy's nonassignment clauses were dispositive and WAK's purported assignment of the policy was ineffective.

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