GEORGE W. NOWELL

SAN FRANCISCO

Chapter 10

ASSIGNMENTS

No claim or demand against the Assurer under this policy shall be assigned or transferred, and no person, excepting a legally appointed receiver of the property of the Assured, shall acquire any right against the Assurer by virtue of this insurance without the expressed consent of the Assurer.

I. APPLICATION AND INTERPRETATION OF THE CLAUSE

IN GENERAL - ASSIGNMENT NOT ALLOWED

Plaintiff, a longshoreman employee of a shipyard, was severly injured. He entered into a settlement with the vessel owners (Prudential Lines), the shipyear (Avondale Shipyard, Inc.) and Norris Industries. Prudential Lines went into voluntary receivership. Plaintiff reduced his settlement to a court-approved judgment pursuant to which: Plaintiff loaned Prudential Lines $476,000 and Prudential Lines paid plaintiff $300,000 in cash and purchased an annuity, making the present value of the Prudential Lines' contribution to settlement of $476,000. Thereafter, Prudential Lines claimed against the defendant P&I club for the $476,000 amount of the settlement and assigned to plaintiff (under their loan agreement) Prudential Lines' entitlement to indemnification from its Club. The court denied plaintiff's claim of assignment, discussing cases, based upon the non-assignability clause in the P&I Policy which "clearly prohibits assignment of claims." Oberton v. American Steamship Owners Mutual Protection and Indemnity Association, 1992 A.M.C. 1545 (S.D.N.Y. 1992). See also Oberton, 1993 AMC 23172 (S.D.N.Y. 1983).

Insurance policies have long been considered personal in nature and, absent a basis fo rfinding waiver or estoppel, where a liability policy requires the written consent of the insurer to effectuate the transfer of the insurance interest, the policy loses its force as contract upon conveyance of the property without such consent: Mortgagee held not entitled to policy.benefits on this and other grounds. Meridian Trading Corp. v. National Automobile & Casualty Ins. Co., 1966 AMC 391, 45 Misc. 2d 847, 258 N.Y.S.2d 16 (1964) (interpreting similar but not the same P&I policy language above (citing N.Y. cases).

II. ASSIGNMENT APPARENTLY ALLOWED - BUT SUBJECT TO THE ARBITRATION CLAUSE

An injured seaman (Sosa) obtained a judgment against vessel owner and operator (Tracey) and sought to collect under an assignment of Tracey's right against the P&I Club (Oceanus) as well as pursuant to an assignment of Oceanus' (in receivership) rights against reinsurers (underwriters at Lloyd's and Certain Institute of London Underwriter Companies) as well as by direct action against the reinsurers. The court held: (1) no direct action by Sosa or the insured (Tracey) was allowed against the reinsurers in the absence of an assignment of the reinsured under English, Bermuda and Texas law; and (2) even if Sosa obtained assignment of Tracey's rights against Oceanus and Oceanus' rights against the reinsurers, Sosa was required to comply with the English arbitration procedures set out in the reinsurance contract. Nonetheless, reading between the lines, the court appears to have given effect to the assignment even though underwriters did not give their written assent. Arkwright-Boston Manufacturer's Mutual Ins. Co. v. Ross, 1991 AMC 627 (S.D. Tex. 1990).

In a case in which new vessel owners bought a vessel covered by a P&I policy as a U.S. Marshall's sale and paid outstanding lien claims, new vessel owners asserted claim s as subrogees and indemnitees against the P&I Club, the Court held, inter alia, that:

(a) The Louisiana Direct Action Statute applies to tort clams and not to contract claims, and all causes of action arising through the purchase of the vessel arose through contract (or quasi-contract in the case of indemnity) and could not be brought under the Statute; and

(b) To the extent subrogation claims sound in tort could be brought subject to the Louisiana Direct Action Statute, they were subject to the P&I Agreement which called for arbitration in London of all disputes (granting stay pending arbitration). (The published case made no mention of a non-assignability clause of P&I benefits). Deutsche-Schiffahrtsbank, A.G. v. Bilbrough and Company, Ltd., 563 F.SUpp. 1307, 1984 AMC 27 (E.D. La. 1983).

A seaman with a judgment against the vessel and assignment of vessel's rights against the P&I Club, can not enforce that judgments against the vessel's P&I Club, except pursuant to the London arbitration clause found in the Rules of the P&I Club. Maritime law neither permits nor prohibits an injured third party from directly suing a vessel owner's insurance provider. State law governs. Alaska has no direct action statute and the P&I Club has no liability until the judgment is paid. Basargin v. Shipowners' Mutual Protectin & Indemnity Association, 1995 AMC 1463 (D. Alaska 1995).

III. ASSIGNMENT ALLOWED - NOTWITHSTANDING THE ANTI- ASSIGNMENT CLAUSE

The Alaska Supreme Court refused to enforce the no-assignment clause in a P&I Policy (clause unspecified; policy underwritten by Pacific Marine Ins. Co. and various Underwriters at Lloyd's and Institute of London Underwriters), in a case in which a seaman on a crab boat was injured and as part of the resolution of his claim against vessel interests, the seaman received an assignment of vessel owner's claims against their P&I Club and a subsequent confession of judgment with his limited covenant not to sue vessel interests. Fulton v. Lloyd's and Institute of London Underwriting Companies, 903 P.2d 1062 (Alaska 1995).

A typewritten rider that names an insured "for account of whom it may concern", is inconsistent with and supercedes the printed terms, including a non-assignability or change of interest clause, so that a sale of the vessel without the consent of the insurer does not invalidate the coverage of the policy and underwriters must pay any loss to all persons whose interests were intended to be covered. Howell v. Globe & Rutgers Fire Ins. Co., 1928 AMC 1806, 231 N.Y.S. 67 (1928) (discussing cases ) (interpreting a different non-assignability clause).

A marine insurance policy was issued to the owner of a sloop, who sold the vessel to the plaintiff, and assigned to him the (hull) policy of insurance, although such assignment was prohibited in the absence of the insurer's written consent, which was never obtained. The sloop went on the rocks, and on the next day the insurer engage a firm of marine engineers to "proceed to the scene of the loss and do the necessary." On the following day, the plaintiff discussed the loss with the insurer, and revealed his purchase of the sloop. Approximately six weeks later, the insurer refused to pay. The court held that the six weeks' delay in refusing payment while the insurer's salvors worked on the wreck and led the insurer to expect a prompt settlement constituted a waiver of the clause prohibiting assignment of the policy. Hilton v. Federal Ins. Co., 1932 AMC 193, 118 Cal.App. 495, 5 P.2d 1932) (interpreting a different non-assignability clause from that above).

IV. MINOR NOTES - GENERAL BACKGROUND CASES

Admiralty will entertain a suit by an assignee. Moran Towing & Transportation Co, Inc. v. Connors-Standard Marina Corp., 316 F.2d 811, 1963 AMC 1173 (2d Cir. 1963).

Plaintiff became the express assignee of the assured shipowner's claims as loss payee under a marine hull insurance policy. New York State law does not prohibit a direct suit by an assignee of an insurance claim against a marine property underwriter. The traditional rule is that an assignee who gives notice of the assignment to the underwriters may not be prejudiced by subsequent dealings, (e.g. releases) between the original parties. Caribe Carriers, Ltd. v. C.E. Heath & Co., 784 F.Supp.1119, 1992 AMC 1382 (S.D.N.Y. 1992) (the case does not interpret any non-assignability clause).