Maryland Enforces Anti-Assignment Clause in Property Insurance Contract, at Least for the Moment

by Robert S. Reverski Jr., Esq.

In a recent decision, the Appellate Court of Maryland, the State’s intermediate appellate court, held that a property insurance contract’s anti-assignment clause applied to void an Insured’s “broad assignment” of rights to a remediation vendor.  In the Matter of the Petition of Featherfall Restoration, LLC, 261 Md. App. 105 (2024), the Insured executed an “Assignment of Claim” presented by a vendor, purporting to grant broad rights relating to a roof damage claim. The Assignment of Claim stated that the Insured “irrevocably transfer[red], assign[ed], and set over [to the vendor] any and all insurance rights, benefits, proceeds, and any causes of action under applicable insurance policies for the above mentioned claim.”  The Insurer, however, did not consent and subsequently refused to recognize such a broad assignment, relying on the anti-assignment language of the insurance contract.

The vendor responded by filing a complaint with the Maryland Insurance Administration, who sided with the Insurer, recognizing that “Maryland applies the objective theory of contract interpretation to insurance policies and enforce[s] that language . . . as long as it does not violate public policy.”  The vendor then appealed to the Circuit Court, which affirmed the Insurance Commissioner’s decision in favor of the Insurer.  The vendor then appealed to the Appellate Court of Maryland.

On March 7, 2024, the Appellate Court likewise rejected the vendor’s argument that a post-loss assignment of a single claim should be permitted. The Court held that a broad assignment, made without the consent of the Insurer, renders the anti-assignment clause meaningless, and that it did not matter whether the assignment was pre-or post-loss. In rejecting the broad “Assignment of Claim,” however, the Court recognized, without expressly ruling, that a mere assignment of benefits due and owing on a claim might be assignable, but not all rights.

The vendor now has taken its appeal to the Supreme Court of Maryland, which recently agreed to hear the case. Oral arguments were presented on December 9, 2024, and we now await a decision from the Court. While the expectation is that the Court will continue to show deference to the decision made by the Insurance Commissioner, there is no guarantee. A decision likely will be published during the first quarter of 2025, announcing whether Maryland will continue to enforce anti-assignment provisions of property insurance contracts.