Like the Oklahoma Sooners took care of the Florida Gators in the Cotton Bowl (55-20), the Oklahoma Supreme Court issued a commanding opinion on December 15, 2020, confirming assignments of claims are valid and enforceable in Oklahoma. In fact, the Oklahoma Supreme Court almost seemed surprised it was even a question when it reversed the trial court’s erroneous grant of summary judgment in favor of the insurance company against a construction company.
In Johnson and Triple Crown Construction v. CSAA General Insurance Company1 (“CSAA”) Johnson’s home was damaged by a storm and she filed a claim against CSAA. Johnson also issued an assignment to her construction company, Triple Diamond, for the purpose of repairing the property. Thereafter, Johnson and Triple Diamond filed suit against CSAA for breach of contract and bad faith. CSAA then filed a Motion to Dismiss or in the alternative Motion for Summary Judgment raising one argument – that the policy and an Oklahoma statute prohibited an assignment of the claim. The district court sustained CSAA’s motion and after Johnson dismissed her claims without prejudice, Triple Diamond appealed the district court’s ruling that the assignment was invalid.
Embarking on a thorough historical analysis of assignments and their acceptance as the majority rule, the Oklahoma Supreme Court clarified that the “concept of a post-loss policy-covered assignment of a chose in action was not new when we addressed it in American Alliance.” In American Alliance,2 the Oklahoma Supreme Court noted an exception occurs when the subject of the assignment is not the policy and its coverage, but a right to receive funds for a policy-covered loss and the assignment occurs after the loss. In its opinion, the court stated:
It seems to be the rule, followed by most courts, that where such a policy is in force and effect at the time the insured property burns, by the happening of the latter event, the relationship between the insurer and the insured becomes simply that of debtor and creditor; and that the chose in action, which the latter then has against the former, may be validly transferred to a third person, by assignment, without compliance with the policy’s requirement that the insurer’s consent thereto (by endorsement or otherwise) be obtained.3
A few years after American Reliance, the Oklahoma Supreme Court again addressed the distinction between assignment of a chose in action and an assignment that creates insurance coverage in Shadid v. American Druggist Fire Insurance Company.4 Following American Reliance, the Oklahoma Supreme Court held that a matured claim is an assignable “chose in action’ despite language in a standard fire policy stating, “Assignment of this policy shall not be valid except with the written consent of this Company.”
Citing to this longstanding legal precedent while providing a historical analysis of the majority rule enforcing assignments based on public policy considerations, the supreme court held on December 15, 2020:
We agree with the majority of courts allowing an assignment by an insured possessing an insurable interest when the subject of the assignment is a post-loss chose in action based upon property insurance.
. . .
An insured possessing an insurable interest may assign a post-loss chose in action based upon a claim against a property insurance policy without violating an insurance policy clause requiring written consent of the insurer for assignment of the policy.5
Immediately after the Oklahoma Supreme Court issued its opinion, counsel for Triple Diamond wrote a direct letter to the Oklahoma Insurance Commissioner on December 17, 2020, stating in relevant portion:
Greetings. My name is Aaron Stiles and I represent a large group of roofing contractors. In the past, your office has investigated contractors for practicing as a public adjuster without a license when they were operating under an Assignment of Claim/Benefits. Your office believed, at the insistence of certain insurers, that these assignments were either illegal or invalid. Attached is the Opinion of the Oklahoma Supreme Court stating clearly and unequivocally your opinion was wrong and that assignments are valid in Oklahoma . . . I must insist that you cease your practice of investigating contractors operating under an assignment now that you have been formally served with notice of the Opinion of the Supreme Court. . . I further ask that any time in the future that an insurer demands a contractor be investigated for operating under right of assignment, that you charge such insurer for filing a false complaint.
So, for all contractors in Oklahoma that utilize assignments in your operations, you can rest assured that they are valid and enforceable when drafted properly. Likewise, it appears the Oklahoma Supreme Court has slightly opened the door to future consideration whether the tort of bad faith in Oklahoma is also assignable despite past rulings to the contrary. With the right facts, it appears the Oklahoma Supreme Court is poised to consider the distinction between a “pure tort” and a “tort arising out of contract” for the purpose of an insured’s assignment of a property insurance chose in action against its insurer. We will have to wait and see what 2021 brings.
1 Johnson v. CSAA General Ins. Co., — P.3d —, 2020 OK 119 (Okla. Dec 15, 2020) (For Official Publication).
2 American Alliance Ins. Co. of N. Y. v. McCallie, 1957 OK 312, 319 P.2d 295 (Okla. 1957).
3 Id. at 298 (relying on court opinions from Wisconsin and Iowa, cases cited in Annotations at 122 A.L.R. 144, 56 A.L.R. 139, and the then current 45 C.J.S. Insurance, 29 Am.Jur. Insurance, and 5 Appleman, Insurance Law and Practice,§ 3458).
4 Shadid v. American Druggist Fire Ins. Co., 1963 OK 146, 386 P.2d 311.
5 Johnson, 2020 OK 119, ¶ 26, ¶ 34 (as corrected Dec. 18, 2020).