A New York trial court has rejected an auto insurer's argument that its insureds' post-accident assignment of rights to an auto repair shop did not permit the shop to sue the insurer for breach of their insurance policies.
The Case
After David Stulberger's 2015 Nissan Rogue was involved in a collision, his automobile insurer, State Farm Insurance Company, sent a representative who determined that the Nissan should be repaired.
M.V.B. Collision, Inc., d/b/a/ Mid Island Collision, repaired the Nissan at a cost of $14,101.80.
State Farm offered $9,960.36.
Mr. Stulberger had the right to pursue State Farm for the difference but, instead, assigned his right to M.V.B.
M.V.B., as assignee of Mr. Stulberger – and as assignee of two other customers in similar circumstances – filed a lawsuit against State Farm for breach of contract as to Mr. Stulberger and the other customers.
State Farm moved to dismiss on the ground that M.V.B. had no legal capacity to sue. It argued that M.V.B. could not enforce the contractual rights of its insureds because they could not assign rights under their policies without State Farm's consent, which it had not provided.
In opposition to the State Farm motion, M.V.B. maintained that the assignments were valid because:
6. By the policy's own language, the insured may not assign any of his/her benefits or rights under the contract. The subject Assignments in the case at bar do not purport to assign any benefits or rights the assignors have under the contract. They assign to Plaintiff the right to pursue STATE FARM, by means of a lawsuit or otherwise, for its refusal to pay for "any and all claims arising out of the adjustment, repair, and payment of physical damage to. . . ." The subject Assignments thereby assign to Plaintiff the assignors' rights to sue Defendant, STATE FARM INSURANCE COMPANY, for breach of their policies by it in refusing to pay the subject claims. . . .
7. The provision in the STATE FARM policies, which were breached by it, states specifically that STATE FARM will pay the cost to repair the covered vehicle, minus any applicable deductible. . . .
8. In light of the fact that Plaintiff, M.V.B. COLLISION, INC., is suing STATE FARM for breach of the subject insurance policies as assignee of the three (3) STATE FARM insureds, . . . the lack of contractual privity between Plaintiff and Defendant, STATE FARM, is irrelevant, as it is not required where there is a valid Assignment.
The State Farm Policies
The State Farm policies provided:
8. AssignmentThe Court's DecisionNo assignment of benefits or other transfer of rights is binding upon us unless approved by us.
The court denied State Farm's motion, holding that the assignments by the State Farm insureds to M.V.B. were valid and not prohibited by the State Farm policy.
The trial court reasoned that, once a loss had occurred, an assignment was regarded as a chose in action under the insurance policy. There was "a strong public policy against restraints on alienation of choses in action," the trial court said, adding that "assignment after loss" was "no longer regarded as a transfer of the policy."
The case is M.V.B. Collision Inc. v. State Farm Ins. Co., No. CV-008402-16NA (N.Y. Dist.Ct. Nassau Co. Feb. 20, 2018). Attorneys involved include: For Plaintiff: Steven F. Goldstein, LLP, New York; For Defendant: Hurwitz & Fine, P.C., Melville, NY.