I recently received a request from a public adjuster regarding the validity of anti-allocation provisions in insurance in Michigan. As it seems, Michigan was not covered in a previous Blog Series on benefit distribution; this post follows.
In Michigan, an insurance policy and its underlying rights can be granted after a loss. Therefore, an anti-allocation clause in an insurance will not be enforced if a loss occurs before the assignment, because in that situation the transfer of a claim under the insurance is not seen differently from any other transfer of an accrued cause of action. 1
In Roger Williams Insurance Company, v. Carrington 2 the Supreme Court of Michigan found, in essence, that an accrued matter can be assigned freely after loss and that a clause against assignment in an insurance policy is not enforceable to limit such an assignment because such a clause violates public order in that situation. In that case, a property was destroyed by a fire. After the fire, the insured assigned an insurance policy to secure a debt. The Supreme Court of Michigan refused to enforce the anti-allocation clause in the relevant insurance policy, declaring:
The assignment made after the loss did not require the consent of the company [insurance]. The provision in the policy that confiscates it for a task without the company's consent is invalid, insofar as it concerns the transfer of an accrued cause of action. It is the absolute right of every person secured in this State by law ̵1; to grant such claims, and such a right cannot be prevented in this way. a property insurance. 3
1 Century Indem. Co. v. Aero-Motive Co. 318 F. Supp. 2d 530, 539 (W.D. Mich. 2003).
2 Roger Williams Ins. Co., v. Carrington 43 Mich. 252 (1880).
3 Mich. Comp. Lagar Ann. § 566.132