I recently received an inquiry from a public adjuster about the validity of anti-assignment provisions in insurance policies in Michigan. As it appears Michigan was not covered in a previous Blog Series about assignment of benefits; this post follows.
In Michigan, an insurance policy and its underlying rights may be assigned after a loss. Therefore, an anti-assignment clause in an insurance policy will not be enforced where a loss occurs before the assignment, because in that situation the assignment of the claim under the policy is viewed no differently than any other assignment of an accrued cause of action.1
In Roger Williams Insurance Company, v. Carrington,2 the Michigan Supreme Court essentially held that an accrued cause of action may be freely assigned after a loss and that an anti-assignment clause in an insurance policy is not enforceable to restrict such an assignment because such a clause violates public policy in that situation. In that case, a property was destroyed by a fire. After the fire, the insured assigned the insurance policy to secure a debt. The Michigan Supreme Court refused to enforce the anti-assignment clause in the relevant insurance policy, explaining:
The assignment having been made after the loss, did not require consent of the [insurance] company. The provision of the policy forfeiting it for an assignment without the company’s consent is invalid, so far as it applies to the transfer of an accrued cause of action. It is the absolute right of every person-secured in this State by statute—to assign such claims, and such a right cannot be thus prevented.
Under Michigan’s version of the statute of frauds, a writing is required for the assignment of a property insurance policy.3
1 Century Indem. Co. v. Aero-Motive Co., 318 F. Supp. 2d 530, 539 (W.D. Mich. 2003).
2 Roger Williams Ins. Co., v. Carrington, 43 Mich. 252 (1880).
3 Mich. Comp. Laws Ann. § 566.132