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Lack Of Compliance With Assignment Procedures Means Insurer Is Not Bound Under Oklahoma Law, Says Court

Blogs, Life Insurance

If there is an assignment of an insurance policy, and a notice of such assignment to the insurer, will the insurer be bound by the assignment?

Not if the assignment fails to meet the requirements under the terms of the policy, at least under Oklahoma law, according to a federal court that recently considered the issue.

The federal court in Bankers Healthcare Group, Inc. v. Reassures America Life Ins. Co., No. CIV-10-1044-D (W.D. Okla. Sept. 30, 2011), restated black letter law under Oklahoma that “Oklahoma has long held that ‘mere notice’ to an insurer of the assignment of a policy ‘does not create a new contract between insurer and assignee’ so as to make the insurer liable on the policy, as there was no ‘meeting of the minds’ sufficient to create a contractual obligation of the insurer to the assignee.”

Thus, said the court, with added emphasis, “[w]here, as in this case, the insurer’s consent to an assignment is required, ‘the assignee acquires no right as against the insurer‘ in the absence of that consent.” The court also quoted an insurance treatise for the proposition that “Life insurance policies may, and often do, expressly provide that they are not assignable without the consent of the insurer issuing them, and in this case, the provision must be complied with … to give the assignee any right thereunder as against the insurer.

The court said that, although the policy provides that it may be assigned by the insured, the relevant policy clause provides that the insurer “is bound by an Assignment only” under certain circumstances, and it “is not liable for any payment made . . . We record the Assignment.” The court also noted that the insurer “maintained express procedures for the acceptance and recording of an assignment, and these were communicated” to the insured and the assignee – and it “is not disputed that these procedures were not followed . . . .”

The court concluded that the “evidence, construed most favorably to [plaintiff] BHG, cannot support a contention that REALIC[, the insurer] accepted the assignment, thereby rendering it contractually liable to the assignee.”

Thus, the court granted summary judgment to the insurer.

The full opinion is available here.