Tuesday, April 9, 2013

Carol Owen v. CNA Insurance/Continental Casualty Company case brief

Carol Owen v. CNA Insurance/Continental Casualty Company case brief summary
167 N.J. 450, 771 A.2d 1208 (2001)

Plaintiff structured settlement beneficiary appealed reversal, by Superior Court, Appellate Division (New Jersey), of a trial court's declaratory judgment that her rights under a contract with defendant, her tortfeasor's insurer, were assignable. The high court considered whether a non-assignment clause in the structured settlement agreement was enforceable.

-Plaintiff's settlement with a tortfeasor provided for structured payouts by defendant insurer over decades.
-When she needed money, she sought to assign her payments to a third party in exchange for a lump sum, but defendant argued that her rights could not be assigned because of an anti-assignment clause in the structured settlement agreement.

-After considering arguments based on the Uniform Commercial Code and New Jersey case law, the high court adopted the restatement approach, which looked to whether the contract declared that attempted assignments were actually void and to whether the obligor would face material hardship as a result of the assignment.

-The court determined that the anti-assignment clause was one covenant among many, breach of which would support an action for damages.
-Furthermore, the settlement was concluded before enactment of tax benefits for obligors under structured settlements, so defendant could not show any great hardship.

A non-assignment clause in a contract is unenforceable unless it materially changes the contract or gives the non-assigning party duties or aspects of compensation that the non-assigning party did not bargain for.

OUTCOME: The court reversed and remanded for further proceedings, holding that under the particular circumstances, where the contract did not provide that assignments were void, and where defendant faced no particular tax or other hardship, the anti-assignment clause was simply a covenant.

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