Assignment Of Insurance Claims

Arlington insurance attorneys will occasionally run across a situation where assigning an insurance claims seems like a good idea. Well it may be, but they need to be aware of this case from the United States Fifth Circuit Court of Appeals. It is styled, Nautilus Insurance Company v. Blanc Lila Villalta et al. Here is the relevant information.
Blanca Lila Villalta and Odis Armando Villalta, each individually and as the surviving parents of Odis Steven Villalta (the “Villaltas”), appealed the district court’s sua sponte grant of summary judgment for Nautilus Insurance Company (“Nautilus”). For the following reasons, the court decided to VACATE and REMAND with direction to ABATE or DISMISS the judgment for Nautilus.
Odis Villalta was shot to death by a security officer employed by Bellaire Security Patrol, Inc. (“Bellaire”). The Villaltas filed a lawsuit in Texas district court against Bellaire and others (the “Villalta case”). Nautilus provided general liability insurance to Bellaire and filed suit in federal district court against the Villaltas, seeking a declaration that the policy issued to Bellaire provides no coverage for damages sought in the Villalta case. The federal district court, sua sponte, issued summary judgment for Nautilus, holding that Nautilus had no duty to defend Bellaire as a matter of law because the “all assault or battery” policy exclusion clearly applied. On appeal, the Villaltas raised two primary issues: (1) whether the district court erred in granting summary judgment concerning Nautilus’s duty to defend; and (2) whether ruling on Nautilus’s duty to indemnify is premature based on the underlying Villalta case, which remains pending in state court.
This court did not address the policy’s coverage because the Villaltas did not have a justiciable interest in the coverage dispute between Bellaire and Nautilus. The Villaltas and Bellaire entered into an agreement whereby: Bellaire agreed to the entry of a $2 million judgment against it in the underlying state case and agreed not to appeal, the Villaltas agreed not to execute on this judgment, and in exchange, Bellaire assigned any rights against Nautilus it may have under the Nautilus policy. This assignment is invalid as to Nautilus as a matter of law. Without a judgment or agreement that Bellaire has a legal obligation to pay damages to the Villaltas, the Villaltas cannot enforce the policy directly against Nautilus.
Making a mistake about whether or not the insurance claim could be assigned was a big problem here.