In re Wehr Constructors, Inc. v. Assurance Company of America

A county hospital (the hospital) planned to build an addition to its facility and purchased a builder’s-risk-insurance policy from Assurance Company of America (Assurance) (defendant) to protect against property damage while construction was underway. The policy contained an anti-assignment clause, which provided that the hospital’s “rights and duties under this policy may not be transferred without” Assurance’s written consent. Thereafter, the hospital contracted with Wehr Constructors, Inc. (Wehr) (plaintiff) to install concrete surfaces and vinyl flooring. Some of the flooring was damaged, and the hospital filed a claim with Assurance for losses exceeding $75,000. Assurance denied the claim. Meanwhile, Wehr and the hospital reached a settlement regarding their rights and obligations under the construction contract, and as part of the settlement terms, the hospital assigned any claim or right it had against Assurance under the builder’s-risk-insurance policy to Wehr. It was undisputed that the flooring damage had already occurred at the time of Assurance’s assignment to Wehr. Wehr, as the hospital’s assignee, sued Assurance in federal district court to recover payment under the insurance policy. Assurance moved for judgment on the pleadings, relying on the anti-assignment clause. The district court certified a question of law to the Kentucky Supreme Court regarding whether, under Kentucky law, an anti-assignment clause was enforceable if the claimed loss occurred before the assignment. The Kentucky Supreme Court granted the certification request.