Wehr Constructors, Inc. v. Assurance Co. of America
2012 Ky. LEXIS 183
Ky.2012Background
- Hospital purchased builder's risk policy from Assurance with a transfer clause requiring insurer consent to assign rights.
- Wehr Constructors subcontracted on Hospital project; portions of installed floors and subsurface were damaged.
- Hospital claimed over $75,000 under the builder's risk policy; Assurance denied the claim.
- Hospital and Wehr settled their dispute; Hospital assigned all rights against Assurance to Wehr.
- Wehr sued Assurance in federal court to recover insurance proceeds; Assurance moved for judgment on the pleadings based on the anti-assignment clause.
- Court analyzes whether post-loss assignments are enforceable and adopts the majority rule that they are not.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Post-loss assignment validity | Wehr argues post-loss chose in action is freely assignable. | Assurance argues anti-assignment clause bars any assignment absent consent. | Post-loss assignment not enforceable against insurer. |
| Applicability of KRS 304.14-250(1) | Statute does not validate post-loss assignments, so law favors assignability. | Statute controls and preserves consent requirement for assignments. | Statute not applicable to post-loss assignments; adopts majority view nonetheless. |
| Public policy rationale | Public policy supports freedom to assign fixed claims after loss. | Public policy supports insurer's control over assignments via consent. | Court adopts majority rule; post-loss assignment void as against public policy. |
| Contract interpretation clarity | Language plainly prohibits assignment without consent, precluding post-loss exception. | Plain language should be enforced, and policy terms are clear. | Language is unambiguous but public policy overrides to permit post-loss assignment. |
Key Cases Cited
- Antal’s Restaurant, Inc. v. Lumbermen's Mut. Casualty Co., 680 A.2d 1386 (D.C.1996) (post-loss assignments not barred by consent clause)
- Conrad Brothers v. John Deere Ins. Co., 640 N.W.2d 231 (Iowa 2001) (post-loss assignment of a chose in action)
- Elat, Inc. v. Aetna Cas. and Sur. Co., 654 A.2d 503 (N.J. Super. A.D. 1995) (post-loss assignability of debt not restricted)
- Kemper Nat. Ins. Cos. v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869 (Ky. 2002) (contract terms construed; policy language emphasis)
- Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99 (Ky. 2003) (contract interpretation and ambiguity standards)
- Three Rivers Rock Co. v. Reed Crushed Stone Co., 530 S.W.2d 202 (Ky.1975) (public policy against restraints on alienation)
- Hazard Municipal Housing Comm'n v. Hinch, 411 S.W.2d 686 (Ky.1967) (public policy limits on contract exemptions)