{"id":892897,"date":"2017-09-12T11:44:08","date_gmt":"2017-09-12T17:44:08","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=892897"},"modified":"2017-09-12T11:44:08","modified_gmt":"2017-09-12T17:44:08","slug":"assignment-contingent-benefits-california","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/assignment-contingent-benefits-california\/","title":{"rendered":"Assignment of Contingent Benefits in California"},"content":{"rendered":"<p>Lawrence Moon | <a href=\"http:\/\/Assignment of Contingent Benefits in California\" target=\"_blank\">Property Insurance Coverage Law Blog<\/a> | September 10, 2017<\/p>\n<p>In\u00a0<a href=\"https:\/\/www.myconstructionexpert.com\/blog\/assignment-unaccrued-contingent-benefits\/\" target=\"_blank\"><em><strong>Assignment of Unaccrued or Contingent Benefits<\/strong><\/em><\/a>, I discussed the distinction between assignments of Contingent Benefits and assignments of Noncontingent Benefits under a property insurance policy. For purposes of this blog, a Contingent Benefit is a benefit or payment that is either not yet fixed in amount or the carrier is not yet obligated to provide because additional, specific conditions of the policy have not yet been fulfilled or excused. Noncontingent Benefits are those for which all of the applicable conditions have been fulfilled or excused and the carrier\u2019s obligation to provide the benefits (such as a payment) has accrued. An example of a Noncontingent Benefit is a policyholder\u2019s right to receive payment of the Actual Cash Value (ACV) of a claim after the insurance company has been notified of the loss and the policyholder has cooperated with the carrier\u2019s evaluation of the loss. An example of a Contingent Benefit regarding a replacement cost property insurance policy is the right to receive the depreciation holdback (sometimes called the replacement cost holdback) prior to completion of the underlying repairs. In other words, the carrier\u2019s obligation to pay the depreciation holdback is contingent upon, and does not arise unless and until, the underlying repairs are completed.<\/p>\n<p>I noted in my previous blog that in 2015, the Supreme Court of California pointed out that insurance companies had only recently begun to challenge the validity of assignments of Contingent Benefits. In this blog, I will discuss how the Supreme Court of California handled that question\u2014that is, the validity of assignments of Contingent Benefits\u2014in\u00a0<em>Fluor Corporation v. Superior Court<\/em>, 61 Cal.4th 1175, 354 P.3d 302 (2015).<\/p>\n<p>The specific question presented to the California Supreme Court in\u00a0<em>Fluor<\/em>\u00a0was whether a statute that has been on the books in California since 1872 had any effect on the court\u2019s prior ruling regarding the validity of assignments of Contingent Benefits under common law principles. In its 2003 decision in\u00a0<em>Henkel Corp. v. Hartford Accident &amp; Indemnity Co.<\/em>, 29 Cal.4th 934, 62 P.3d 69 (2003), the court ruled that, based on common law principles, the policyholder under a liability policy that contained a provision prohibiting assignments could not assign the right to invoke coverage under the policy, even after a loss, until the loss had \u201cbeen reduced to a sum of money due or to become due.\u201d In other words, in\u00a0<em>Henkel<\/em>, the court ruled that, under common law principles, the policyholder\u2019s assignment of a Contingent Benefit under a liability policy was not valid or enforceable, despite the fact that the respective loss had already occurred.<\/p>\n<p><em>Henkel<\/em>\u00a0remained the law in California with respect to post-loss assignments of Contingent Benefits until the court was asked to review the same question in\u00a0<em>Fluor<\/em>\u2014except in\u00a0<em>Fluor<\/em>, the court was asked to consider that question in light of section 520 of California\u2019s Insurance Code. That section states: \u201cAn agreement not to transfer the claim of the insured against the insurer after a loss has happened, is void if made before the loss.\u201d Although section 520 was in effect at the time the court decided\u00a0<em>Henkel<\/em>, neither party addressed section 520 and the court did not consider that statute when it reached its decision based on common law principles.<\/p>\n<p>In a lengthy opinion in which it analyzed the history of California\u2019s insurance code and the treatment of assignments of insurance benefits, specifically regarding liability policies, the California Supreme Court ruled in\u00a0<em>Fluor<\/em>\u00a0that section 520 prohibits carriers from refusing to honor post-loss assignments of Contingent Benefits, as well as Noncontingent Benefits. The court further held that section 520 supersedes common law principles applicable to assignments, including the principles it relied on when it decided\u00a0<em>Henkel<\/em>\u00a0twelve years before.<\/p>\n<p>The court noted that the principle reflected in the decisions of other courts that have upheld the validity of post-loss assignments of Contingent Benefits have been \u201cdescribed as a venerable one, born of experience and practice, facilitating the productive transformation of corporate entities, and thereby fostering economic activity.\u201d Interestingly, the court surmised that although section 520 of California\u2019s Insurance Code has been in effect for over 145 years, it had not previously been asked to address its application to assignments of Contingent Benefits apparently because insurers had only \u201crecently beg[u]n to disallow and contest such assignments [and therefore,] . . . there was little cause for insureds to think about, much less rely on, section 520.\u201d<\/p>\n<p>Although the decision in\u00a0<em>Fluor<\/em>\u00a0concerned a post-loss assignment of benefits under a liability policy, the court at least suggested that section 520 applies to first party, as well as third party, policies. Therefore, policyholders under property insurance policies should be able to rely on section 520. The California Supreme Court decision in\u00a0<em>Fluor<\/em>\u00a0suggests that post-loss assignments of Contingent Benefits under property insurance policies are valid in California, as in the other states I mentioned in my prior blog.<\/p>\n<p>In an upcoming blog, I\u2019ll discuss how we addressed the issue of post-loss assignments of Contingent Benefits in the Arizona cases we are handling, and how the courts in Arizona have ruled on that question.<\/p>\n<p>Sometimes courts express general principles that go beyond the specific case they are deciding and which are worth noting in other contexts, even on a personal level. In that regard, the California Supreme Court stated the following in its last footnote in\u00a0<em>Fluor<\/em>, in which it addressed the fact that neither party in\u00a0<em>Henkel<\/em>\u00a0had raised section 520 in their briefs, although that statute clearly applied to the dispute and would have changed the outcome of it:<\/p>\n<blockquote><p>Of course, this still does not explain why section 520 was not discussed by the parties \u2014 especially the plaintiff or its amicus curiae \u2014 in Henkel itself. And yet as observed . . . such omissions occasionally happen. This reminds us that even with access to computer research technology, any human enterprise cannot be perfect; and that it is better that wisdom, or at least controlling authority, come to our attention late, rather than not at all.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Lawrence Moon | Property Insurance Coverage Law Blog | September 10, 2017 In\u00a0Assignment of Unaccrued or Contingent Benefits, I discussed the distinction between assignments of Contingent Benefits and assignments of Noncontingent Benefits under a property insurance policy. For purposes of this blog, a Contingent Benefit is a benefit or payment that is either not yet&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/assignment-contingent-benefits-california\/\">Continue reading <span class=\"screen-reader-text\">Assignment of Contingent Benefits in California<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[3],"tags":[9895,10260,88],"class_list":["post-892897","post","type-post","status-publish","format-standard","hentry","category-insurance-claims","tag-advise-consult","tag-assignment-of-contingent-benefits","tag-california","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Assignment of Contingent Benefits in California - Advise &amp; 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