Choice of Law Considerations Are Important When Considering Assignability: All1, LLC v. Pinnacle Insurance Solutions, LLC, 219 Westlaw 3072090, 219 N.J. Supr. LEXIS 1617 (N.J. App. 2019)
By David W. Henry, Esq.
Edited by Timothy G. Ventura, Esq.
After Automotive Innovations suffered a fire loss at one of its locations, it discovered it had inadequate insurance coverage to cover its property losses and losses from the interruption of its business. Automotive Innovations later executed an assignment for the benefit of creditors as permitted by statute, and the court approved the assignment of Automotive’s assets to the plaintiff All1, LLC, including the assignment of those potential causes of action against Automotive’s insurance broker, Pinnacle Insurance Solutions, LLC.
All1, as Automotive’s assignee, filed a suit against the insurance broker, asserting that it failed to exercise reasonable skill and diligence in ascertaining Automotive’s coverage needs and/or failed to supply the coverage it undertook a duty to provide. They allege that the defendant was negligent and breached a duty it owed to Automotive as its insurance broker. In Count II, the plaintiff alleged the defendant was liable for consequential damages, including the loss of goodwill Automotive sustained as a result of inadequate business interruption insurance.
The court entered summary judgment in favor of the defendant on the Count II, contending that the plaintiff could only obtain damages in the amount equal to the amount of insurance the defendant was asked to obtain and could not recover consequential damages for losses proximately caused by the alleged inadequate business interruption insurance. The parties went to trial on the first count, and the defendant moved for an involuntary dismissal, contending that the plaintiff, as Automotive’s assignee, could not prosecute the agency negligence claim. The trial court denied the motion for involuntary dismissal and ultimately rendered a verdict in the plaintiff’s favor, which was challenged on appeal.
On appeal, the appellate court reaffirmed New Jersey’s long-standing rule against the assignment of tort claims prior to judgment. The plaintiff had argued that, in essence, the tort claims were in nature of a claim for breach of contract for failure to procure, but the court characterized the action as one sounding in negligence for malpractice and consistent with a long line of cases that have held that those types of negligence claims are not assignable. The plaintiff contended that the rule against assignments should only be limited to tort claims involving personal injuries, but the court disagreed, finding that the prohibition has been applied to assignment tort claims that do not involve merely personal injuries. Because the assignment of the claims against the insurance agent and broker was invalid, the court set aside the verdict for the plaintiff and entered judgment for the defendant.
There is a split of authority among various jurisdictions on whether negligence claims against insurance agents are assignable. The law in New Jersey is a minority view, holding that E&O claims are not assignable, while other courts hold that causes of action against insurance agents are not personal to the claimant and are freely assignable. See Wachovia Insurance Services, Inc. v. Toomey, 994 So. 2d 980 (Fla. 2008); Associated Insurance Services v. Garcia, 307 SW 3d 58 (KY 2010)(claim for professional malpractice against insurance agent could be assigned); but see, Midwest Mutual Insurance Company v. Arkansas National Company, 260 Ark. 3352 (Ark. 1976) (action against insurance agent in a tort was not assignable.)
Most courts recognize that a tort accrues where the last element of the tort takes place, and if the last element of the tort is damages, then those damages are typically suffered in the state of the plaintiff’s residence or principal place of business. Consequently, the law governing the assignability of the claim may flow from the location of the plaintiff’s business, not where the underlying activities of the defendant agency took place. Choice of law considerations are extremely important when considering assignability where the agency and the agency client reside in different venues.
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