The central issue in this insurance contract case is whether an anti-assignment clause providing that “[y]our rights or duties under this policy may not be transferred without our written consent [ ]” is ambiguous and thus should be construed against its drafter. A trial court held that the clause was not ambiguous. The Court of Appeals reversed. Holloway v. Republic Indemnity Co. of America,
Fields (insured) owned and operated a restaurant as a sole proprietorship under the name “Loree’s Chalet.” During 1997, Republic Indemnity Company of America (Republic) undertook to insure the insured and issued her a “Workers’ Compensation and Employers’ Liability Policy.” That insurance policy contained the following provisiоns:
“GENERAL SECTION
“A. The Policy
“ [This policy] is a contract of insurance between you (the employer named in Item 1 of the Information Page) and us (the insurer named on the Information Page). * * *[1 ]
“B. Who Is Insured
“You are insured if you are an employer named in Item 1 of the Information Page. * * *
"* * * * *
“PART TWO-EMPLOYERS LIABILITY INSURANCE
"* * * * *
“B. We Will Pay
We will pay all sums you legally must pay as damages because of bodily injury to your employees, provided the bodily injury is covered by this Employers Liability Insurance.
*647 «Hí Hi Hi Hi ^
“C. Exclusions
“This insurance does not cover:
«Hi Hi Hi Hi Hi
“5. bodily injury intentionally caused or aggravated by you; [or]
«‡ Hi Hi % ❖
“7. damages arising out of * * * harassment, * * * discrimination against or termination of any employee ***[.]
«Hi Hi Hi Hi Hi
“D. We Will Defend
“We have the right and duty to defend, at our expense, any claim, proceeding or suit against you for damages payable by this insurance. * * *
“We have no duty to defend a claim, proceeding or suit that is not covered by this insurance. * * *
«Hi H« Hi Hi Hi
“PART SIX-CONDITIONS
«Hi Hi Hi Hi Hi
“C. Transfer of Your Rights and Duties
‘Your rights or duties under this policy may not be transferred without our written consent.”
While Republic’s insurance policy was in effect, plaintiff below (Holloway) began working as a waitress for the insured’s restaurant. The insured also employed Zullig as a manager and bartender for the restaurant. According to Holloway,
“Zullig gave [Holloway], over her objection, gifts of jewelry that * * * were stolen from [the insured’s] jewelry display and sales case located in the restaurant. This made [Holloway] anxious and fearful that * * * Zullig intended to gain control over her by threatening to report that [Holloway] had stolen the items from the disрlay case.”
Holloway reported Zullig’s conduct to the insured on several occasions, but the insured took no action to investigate or correct Zullig’s harassing conduct. According to Holloway, Zullig’s conduct was “known to, authorized and ratified by” the insured, and the insured “deliberately created, maintained and permitted the harassment with the specific intention that it would fоrce [Holloway] to resign.” In fact, Holloway eventually did resign, allegedly due to Zullig’s harassment.
Holloway subsequently brought an action against the insured, alleging employment discrimination by means of sexual harassment, constructive discharge, and intentional infliction of emotional distress. The insured notified Republic of the action and tendered her defense to Republic. Republic, however refused to defend the insured.
Following that refusal, the insured and Holloway reached a settlement agreement. Under that agreement, the insured and Holloway stipulated to the entry of a $50,000 judgment against the insured, and Holloway entered into a covenant not to execute on the judgment against the insured for more than $6,000. The insured paid Holloway the agreed-upоn $6,000, and Holloway entered a satisfaction of the judgment as to the insured. Also under that settlement agreement, the insured purported to assign to Holloway all the insured’s rights to any claim that she might have
Upon receiving that purported assignment, Holloway brought the present breach of contraсt action against Republic, asserting that Republic had breached its duty to defend the insured and its duty to indemnify the insured. Through that action, Holloway sought to recover from Republic the insured’s attorney fees and costs incurred while defending against Holloways tort action, Holloways attorney fees and costs incurred in her tort action against the insured, the remaining unsatisfied part of the judgment that she had received against the insured ($44,000), and Holloways attorney fees and costs incurred in the contract action against Republic.
Holloway and Republic filed cross-motions for summary judgment. In support of its motion, Republic presented two arguments. First, Republic claimed that it had no duty to defend or indemnify the insured because, under two exclusions in the insurance policy, the tortious conduct that Holloway had alleged in her action against the insured was not covered by Republic’s policy. Specifically, Republic asserted that the conduct alleged in Holloway’s action against the insured fell within both the intentional acts exclusion and the harassment, discrimination, and termination exclusion of the insurance policy. Acсording to Republic, because the alleged conduct was not covered under the terms of the insurance policy, Republic had no duty to defend or indemnify. Second, Republic maintained that, in any event, Holloway had acquired no rights from the insured under the purported assignment that was part of the settlement agreement between Holloway and the insured.
In its letter opinion, the trial court agreed with Republic’s first argument and held that Republic had no duty to defend or indemnify. Accordingly, the trial court granted Republic’s motion and denied Holloways motion. The trial court did not address Republic’s second argument, apparently because it found Republic’s first argument to be persuasive and dispositive.
Holloway appealed the trial court’s judgment, arguing that the trial court had erred in granting Republic’s
As to the Court of Appeals’ first conclusion, that court examinеd the text of the insurance policy’s exclusions and the nature of the factual allegations that Holloway had made in her complaint against the insured. Id. at 384-91. Ultimately, the Court of Appeals reasoned that Holloway’s complaint alleged an impleaded battery claim that did not fall within the insurance policy’s exclusions. Id. at 390-91.
Regarding its second conclusion, the Court оf Appeals explained:
“[T]he insurance policy at issue in this case provides that the ‘rights or duties under this policy may not be transferred without [Republic’s] written consent.’ Nothing in the policy states what ‘rights or duties’ may not be ‘transferred.’ The ‘rights or duties’ could refer to pre-loss rights or duties, post-loss rights or duties, or both. We must choose among those understandings.
“If the provision prohibits the assignmеnt of pre-loss rights or duties, then it would ‘protect the insurer against increased risks of loss resulting from an assignment of coverage to a new insured.’ Conrad Brothers v. John Deere Ins. Co.,640 NW2d 231 , 237 (Iowa 2001). The insurer has bargained to accept the risk presented by the particular insured with whom it has contracted, and it makes sense for the insurer to seek to protect itself from the unknown risks to which an assignee insured might expose it. Hоwever, it would also be reasonable for the policy to insulate the insured from exposure to claims for indemnification from third-party claimants after a loss has occurred. The context of the policy provides little guidance, and, on the whole, it would be reasonable to read the provision to apply to either pre-loss or post-loss rights and duties, оr both. In short, the provision is ambiguous.
“Because the provision is ambiguous, we construe it against its drafter and conclude that it prohibits only the assignment of pre-loss rights and duties. Our conclusion is*651 consistent with what appears to be the majority rule. See, e.g., Conrad Brothers,640 NW2d at 236-38 (citing cases); Insurance, 44 Am Jur 2d 102 801 (2003) (‘In the absence of an express provision to the contrary, provisions relating to the consent of the insurer to an assignment do not relate to assignments after loss or to assignments as collateral security/ (Footnotes omitted.)). But see High-Tech-Enterprises, Inc. v. Gen. Accident Ins. Co., 430 Pa Super 605,635 A2d 639 (1993) (holding that assignment of insured’s rights to coverage for property damage under automobile insurance policy to automobile repairer was invalid because of anti-assignment provision). Consequently, nothing in the policy affects the validity or effectiveness of the assignment, and we reject [Republic’s] argument on that point.”
Id. at 381-82. Based upon those two conclusions, the Court of Appeals held that the trial court had erred in granting Republic’s motion for summary judgment and in denying Holloway’s motion for summary judgment.
On review, the issues before us are whether Holloway alleged facts in her complaint against the insured sufficient to trigger Republic’s duty to defend or duty to indemnify and whether the purported assignment from the insured to Holloway was valid. However, our analysis begins, and ends, with our decision respecting whether the purported assignment from the insured to Holloway was valid. Because we hold that it was not, we need not decide the issue respecting the allegations in Holloway’s complaint.
Deciding the validity of the purported assignment in this case turns on the proper interpretation of the anti-assignment clause contained in the insurance policy between Republic and the insured. Interpretation of an insurance policy is a question of law, and our task is to ascertain the intention of the parties to the insurance policy. Hoffman Construction Co. v. Fred S. James & Co.,
If an insurance policy explicitly defines the phrase in questiоn, we apply that definition. See Groshong v. Mutual of Enumclaw Ins. Co.,
The phrase in question here — the text of the insurance policy’s anti-assignment clause — provides that “[y]our rights or duties under this policy may not be transferred without our written consent.” The policy does not provide an explicit definition for the phrase “rights or duties”; therefore, we must decide whether that phrase has a plain meaning.
As discussed above, the Court of Appeals concluded that “[n]othing in the policy states what ‘rights or duties’ may not be ‘transferred.’ The ‘rights or duties’ could refer to pre-loss rights or duties, post-loss rights or duties, or both.”
The anti-assignment clause specifically states that “[ylour rights or duties” may not be assigned. (Emphasis added.) The only plausible interpretation of the word “your” is that it refers to the insured. That conclusion is supported by the text of the policy. Specifically, the policy provides that “[i]t is a contract of insurance between you (the employer named in Item 1 of the Information Page) and us (the insurer named on the Information Page).” The policy further provides that “[y]ou are insured if you are an employer named in Item 1 of the Information Page.” The policy consistently uses the words “you” and “your” to refer to the insured. Thus, the anti-assignment clause restricts the assignment of the insured’s “rights or duties.”
Reaching that conclusion does not end our analysis, however, because we have not addressed the Court of Appeals’ “pre-loss” and “post-loss” dichotomy. Nevertheless, as we shall see, we conclude that that court’s interpretation is not reasonable on the face of the contractual text or in the broader context of the policy as a whole.
The anti-assignment clause here is worded broadly; it contains no exceptions or qualifications. It explicitly prohibits, without Republic’s written consent, the assignment of “[y]our [the insured’s] rights or duties under this policy [.]” According to those terms, the clause applies to whatever rights or duties the insured may have under the policy. Nothing in the clause suggests a limitation to pre-loss rights or duties or provides an exception for post-loss rights or duties. Reading such an exception into the policy would not be reasоnable and would “insert what has been omitted.” See ORS 42.230 (providing that “[i]n the construction of an instrument, the office of the judge is simply to ascertain and
Pacific First Bank v. New Morgan Park Corp.,
In sum, the only reasonable interpretation of the anti-assignment clause at issue in this case is that it prohibits the assignment of the insured’s rights or duties without regard to whether they arose pre-loss or post-loss. In other words, none of the insured’s rights or duties could be assigned without Republic’s written cоnsent.
In reaching its conclusion that the anti-assignment clause was ambiguous as to whether it referred to pre-loss or post-loss rights or duties, the Court of Appeals cited a number of authorities that the court asserted supported its interpretation. See Holloway,
When considered in context, the anti-assignment clause in question is not ambiguous. The Court of Appeals therefore erred in declaring that the clause was ambiguous аnd in construing the anti-assignment clause against its drafter, Republic. Applying the proper interpretation of the anti-assignment clause, we conclude that that clause prohibited the assignment of rights from the insured to Holloway because the insured had not obtained Republic’s written consent. Because the assignment was not valid, Holloway obtained no rights against Republic. Thе trial court did not err in granting Republic’s motion for summary judgment and in denying Holloway’s motion for summary judgment. The contrary conclusion of the Court of Appeals was erroneous.
The decision of the Court of Appeals is reversed. The judgment of the circuit court is affirmed.
Notes
The policy’s information page listed the insured as the employer and Republic as the insurer.
Holloway made the allegations set out in the text in the complaint by which she initiated the action against the insured.
Ultimately, the Court of Appeals reversed the trial court’s judgment on Republic’s duty to defend and reversed and remanded the trial court’s judgment on Republic’s duty to indemnify. Holloway v. Republic Indemnity Co. of America,
We recognize, of course, that even unambiguous contract provisions may be held invalid when they are inconsistent with statutes or with certain overriding public policies. See ORS 72.2100(2), (4) (Uniform Commercial Code provisions limiting certain anti-assignment clauses in contracts for the sale of goods). Holloway, however, identifies no statute that would invalidate the anti-assignment provisions of the insurance contract here, and our prior cases provide no basis for arguing that an anti-assignment provision in a commercial insurance contract is unenforceable.