I think it’s fair to say that there’s been an uptick in litigation involving commercial lease disputes and retail property closings gone awry over the last 15 months. And for obvious reasons. The commercial real estate industry has taken a beating from COVID-19.
Some evidence of this of this uptick can be found in the
[I] irrevocably release and forever discharge [the Company] . . . from any and all actions, causes of action, suits, debts, claims, complaints, liabilities, obligations, charges, contracts, controversies, agreements, promises, damages, expenses, counterclaims, cross-claims, [etc.] whatsoever, in law or equity, known or unknown, [I] ever had, now have, or may have against the [Company] from
Parties to a contract generally can include in their agreement a provision preventing assignment of the agreement’s rights and remedies without the consent of both parties. Because a party’s assignment of rights under a contract to a third party may have serious implications for both sides in the performance of that agreement, anti-assignment clauses protect the contracting parties by ensuring that no transfer of the agreement’s rights occurs without the consent of all involved. Dance with the date you brought. And absent fraud, unconscionability, or some other reason to invalidate the contract, courts generally enforce those anti-assignment clauses.
In the insurance context, however, the enforcement of anti-assignment clauses is more complicated. Because insurers—like any contractual party—have a legitimate interest in protecting themselves from insureds’ assignment of the insurance agreement to a different, perhaps more risky party, anti-assignment clauses in insurance agreements are enforceable against assignments that occur prior to a covered loss. Arrowood Indem. Co. v. Atlantic Mut. Ins. Co., 96 AD3d 693, 694 [1st Dept 2012]. But in circumstances where the assignment occurs after the covered loss, New York courts are more critical of anti-assignment clauses. In those circumstances, courts reason, there is no increased risk to the insured; the loss already occurred, and the only thing that changes as a result of the assignment is who the insurer will need to pay for that loss.
In Certain Underwriters At Lloyd’s, London v AT&T, Corp., 2021 N.Y. Slip Op. 31740[U], a recent decision by New York Commercial Division Justice Cohen, the Court explores the exceptions to the general rules regarding anti-assignment clauses in insurance policies. Ultimately, the case underscores the difficulties insurers face in disclaiming coverage by enforcement of an anti-assignment clause in the policy.Continue Reading Can You Assign Your Rights Under an Insurance Contract that Prohibits Assignment? Only for Prior, Fixed Losses