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Change Number: Change 180 GSAR Case 2022-G505 Effective Date: 05/02/2024

Subpart 532.8 - Assignment of Claims

Subpart 532.8 - Assignment of Claims

532.805 procedure..

(a)  When acknowledging receipt of the notice of assignment, the contracting officer shall notify the contractor that all future invoices or other requests for payment under the contract must specify the name and address of the assignee and include a notation that payments due thereunder have been duly assigned. The contracting officer must send a copy of the acknowledgment to the contract finance office.

(b)  When payments under requirements or indefinite quantity contracts that are for the sole use of GSA have been assigned, the contracting officer shall provide all GSA offices that will place orders against the contract the name and address of the assignee that will receive amounts due under the contract. The notification should also state that the contracting officer requested the contractor to specify the name and address of the assignee on future invoices.

532.806 Contract clauses.

Insert the clause at 552.232-23 , Assignment of Claims, in solicitations and requirements or indefinite quantity contracts under which more than one agency may place orders.

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Assignment of Benefits: What It Is, and How It Can Affect your Property Insurance Claim

assignment of future claims

Table of Contents

What is an Assignment of Benefits?

In the context of insured property claims, an assignment of benefits (AOB) is an agreement between you and a contractor in which you give the contractor your right to insurance payments for a specific scope of work .  In exchange, the contractor agrees that it will not seek payment from you for that scope of work, except for the amount of any applicable deductible.  In other words, you give part of your insurance claim to your contractor, and your contractor agrees not to collect from you for part of its work.

The most important thing to know about an assignment of benefits is that it puts your contractor in control your claim , at least for their scope of work.  Losing that control can significantly affect the direction and outcome of your claim, so you should fully understand the implications of an AOB (sometimes called an assignment of claims or AOC) before signing one.

How Does an Assignment of Benefits Work in Practice? 

Let’s say you’re an insured homeowner, and Hurricane Ian significantly damaged your roof.  Let’s also assume your homeowner’s policy covers that damage.  A roofer, after inspecting your roof and reviewing your insurance policy, might conclude that your insurer is probably going to pay for a roof replacement under your insurance policy.  The only problem is that it’s early in the recovery process, and your insurer hasn’t yet stated whether it will pay for the roof replacement proposed by your contractor. So if you want your roof replaced now, you would ordinarily agree to pay your roofer for the replacement, and wait in hopes that your insurer reimburses you for the work.  This means that if your insurance company refuses to pay or drags out payment, you’re on the hook to your roofer for the cost of the replacement.

As an alternative to agreeing to pay your roofer for the full cost of the work, you could sign an assignment of benefits for the roof replacement.  In this scenario, your roofer owns the part of your insurance claim that pertains to the roof replacement.  You might have to pay your roofer for the amount of your deductible, but you probably don’t have to pay them for the rest of the cost of the work.  And if your insurance company refuses to pay or drags out payment for the roof replacement, it’s your roofer, and not you, who would be on the hook for that shortfall.

So should you sign an AOB?  Not necessarily.  Read below to understand the pros and cons of an assignment of benefits.

Are There any Downsides to Signing an Assignment of Benefits?


You lose control of your claim . This is the most important factor to understand when considering whether to sign an AOB.  An AOB is a formal assignment of your legal rights to payment under your insurance contract.  Unless you’re able to cancel the AOB, your contractor will have full control over your claim as it relates to their work. 

To explain why that control could matter, let’s go back to the roof replacement example.  When you signed the AOB, the scope of work you agreed on was to replace the roof.  But you’re not a roofing expert, so you don’t know whether the costs charged or the materials used by the roofer in its statement of work are industry appropriate or not.  In most cases, they probably are appropriate, and there’s no problem.  But if they’re not – if, for instance, the roofer’s prices are unreasonably high – then the insurer may not approve coverage for the replacement.  At that point, the roofer could lower its prices so the insurer approves the work, but it doesn’t have to, because it controls the claim .  Instead it could hold up work and threaten to sue your insurer unless it approves the work at the originally proposed price.  Now the entire project is insnared in litigation, leaving you in a tough spot with your insurer for your other claims and, most importantly, with an old leaky roof.

Misunderstanding the Scope of Work.   Another issue that can arise is that you don’t understand the scope of the assignment of benefits.  Contractor estimates and scopes of work are often highly technical documents that can be long on detail but short on clarity.  Contractors are experts at reading and writing them.  You are not.  That difference matters because the extent of your assignment of benefits is based on that technical, difficult-to-understand scope of work.  This can lead to situations where your understanding of what you’re authorizing the contractor to do is very different from what you’ve actually authorized in the AOB agreement.

In many cases, it’s not necessary .   Many contractors will work with you and your insurer to provide a detailed estimate of their work, and will not begin that work until your insurer has approved coverage for it.  This arrangement significantly reduces the risk of you being on the hook for uninsured repairs, without creating any of the potential problems that can occur when you give away your rights to your claim.

Do I have to sign an Assignment of Benefits?

No.  You are absolutely not required to sign an AOB if you do not want to. 

Are There any Benefits to Signing an Assignment of Benefits?

Potentially, but only if you’ve fully vetted your contractor and your claim involves complicated and technical construction issues that you don’t want to deal with. 

First, you must do your homework to fully vet your contractor!  Do not just take their word for it or be duped by slick ads.  Read reviews, understand their certificate of insurance, know where they’re located, and, if possible, ask for and talk to references.  If you’ve determined that the contractor is highly competent at the work they do, is fully insured, and has a good reputation with customers, then that reduces the risk that they’ll abuse their rights to your claim.

Second, if your claim involves complicated reconstruction issues, a reputable contractor may be well equipped to handle the claim and move it forward.  If you don’t want to deal with the hassle of handling a complicated claim like this, and you know you have a good contractor, one way to get rid of that hassle is an AOB.

Another way to get rid of the hassle is to try Claimly, the all-in-one claims handling tool that get you results but keeps you in control of your claim.  

Can my insurance policy restrict the use of AOBs?

Yes, it’s possible that your Florida insurance policy restricts the use of AOBs, but only if all of the following criteria are met:

  • When you selected your coverage, your insurer offered you a different policy with the same coverage, only it did not restrict the right to sign an AOB.
  • Your insurer made the restricted policy available at a lower cost than the unrestricted policy.
  • If the policy completely prohibits AOBs, then it was made available at a lower cost than any policy partially prohibiting AOBs.
  • The policy includes on its face the following notice in 18-point uppercase and boldfaced type:



Pro Tip : If you have an electronic copy of your complete insurance policy (not just the declaration page), then search for “policy does not allow the unrestricted assignment” or another phrase from the required language above to see if your policy restricts an AOB.  If your policy doesn’t contain this required language, it probably doesn’t restrict AOBs.

Do I have any rights or protections concerning Assignments of Benefits?

Yes, you do.  Florida recently enacted laws that protect consumers when dealing with an AOB.

Protections in the AOB Contract

To be enforceable, a Assignments of Benefits must meet all of the following requirements:

  • Be in writing and executed by and between you and the contractor.
  • Contain a provision that allows you to cancel the assignment agreement without a penalty or fee by submitting a written notice of cancellation signed by the you to the assignee:
  • at least 30 days after the date work on the property is scheduled to commence if the assignee has not substantially performed, or
  • at least 30 days after the execution of the agreement if the agreement does not contain a commencement date and the assignee has not begun substantial work on the property.
  • Contain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date on which the assignment agreement is executed or the date on which work begins, whichever is earlier.
  • Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee .
  • Relate only to work to be performed by the assignee for services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property.
  • Contain the following notice in 18-point uppercase and boldfaced type:


  • Contain a provision requiring the assignee to indemnify and hold harmless the assignor from all liabilities, damages, losses, and costs, including, but not limited to, attorney fees.

Contractor Duties

Under Florida law, a contractor (or anyone else) receiving rights to a claim under an AOB:

  • Must provide you with accurate and up-to-date revised estimates of the scope of work to be performed as supplemental or additional repairs are required.
  • Must perform the work in accordance with accepted industry standards.
  • May not seek payment from you exceeding the applicable deductible under the policy unless asked the contractor to perform additional work at the your own expense.
  • Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, submit to examinations under oath and recorded statements conducted by the insurer or the insurer’s representative that are reasonably necessary, based on the scope of the work and the complexity of the claim, which examinations and recorded statements must be limited to matters related to the services provided, the cost of the services, and the assignment agreement.
  • Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, participate in appraisal or other alternative dispute resolution methods in accordance with the terms of the policy.
  • If the contractor is making emergency repairs, the assignment of benefits cannot exceed the greater of $3,000 or 1% of your Coverage A limit.

Recommended Posts

Homeowners: 5 things to do after a property loss, five essential tips for navigating a renters insurance claim, the florida contractor’s guide to aobs: laws, requirements, and faqs.

Brelly’s tools and resources are your secret weapon to getting your insurance claim filed right, moving fast, and paid fully .

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Commentaries on European Contract Laws

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162611 Assignment of Claims

  • Published: August 2018
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‘Contractual claims represent a major tradable asset. They can be sold outright, as in the typical factoring transaction, or assigned by way of security for a loan or other obligation. The purpose of this Chapter is to set out principles and rules which are designed to facilitate the assignment of claims, whether individually or in bulk, whilst at the same time ensuring that the debtor’s rights are not prejudiced by the assignment.

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Assignment of Claims

  • First Online: 02 September 2017

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assignment of future claims

  • İlhan Helvacı 2  

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A claim arising from a contract or some other source of obligation, such as a tort or unjust enrichment, may be transferred to third parties. A claim may be transferred by an agreement, by a court order or by law. In this section, assignment of claims effected by agreement and those effected by a court decision or operation of law are analysed respectively.

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For further explanations, see Kocaman ( 1989 ), Dayınlarlı ( 2008 ), Günergök ( 2014 ).

Cession des créances , Abtretung von Forderungen .

Becker ( 1941 ), art. 164, N. 4.

Tercier ( 2004 ), p. 304; Thévenoz and Werro ( 2012 ), art. 164, N. 32–35; Eren ( 2015 ), p. 1236; Tercier et al. ( 2016 ), p. 521; Engel ( 1997 ), p. 872.

Eren ( 2015 ), p. 1237; Tercier et al. ( 2016 ), p. 522; Engel ( 1997 ), p. 872; Tercier ( 2004 ), p. 305; Thévenoz and Werro ( 2012 ), art. 164, N. 36.

Tekinay et al. ( 1993 ), p. 247; Eren ( 2015 ), p. 1237; Oğuzman and Öz ( 2016 ), pp. 571–574; Tercier et al. ( 2016 ), p. 522.

Becker ( 1941 ), art. 164, N. 5; Tercier ( 2004 ), p. 305; Tekinay et al. ( 1993 ), p. 240; Tercier et al. ( 2016 ), p. 522.

Déclaration de volonté , Willenserklärung .

Thévenoz and Werro ( 2012 ), art. 164, N. 20; Oğuzman and Öz ( 2016 ), p. 566.

Oğuzman and Öz ( 2016 ), pp. 562–563; Reisoğlu ( 2014 ), p. 466; Nomer ( 2015 ), p. 449.

Acte de disposition , Verfügungsgeschäft . See Chap. 14 fn. 5–6.

Conversely, such a contract is an acquisitive transaction with regard to the assignee.

Pouvoir de disposer, Verfügungsmacht .

Tercier ( 2004 ), p. 306.

Oğuzman and Öz ( 2016 ), p. 560.

Eren ( 2015 ), p. 1231; Tekinay et al. ( 1993 ), pp. 241–242.

von Tuhr and Escher ( 1974 ), § 93, II, p. 333; Oğuzman and Öz ( 2016 ), p. 560; Reisoğlu ( 2014 ), p. 465; Becker ( 1941 ), art. 164, N. 1. For further explanations see Honsell et al. ( 2003 ), art. 164, N. 23–25.

Nomer ( 2015 ), p. 449; Oğuzman and Öz ( 2016 ), p. 569.

Oğuzman and Öz ( 2016 ), p. 563.

See Sect. 8.2.2 .

Nomer ( 2015 ), p. 449; Oğuzman and Öz ( 2016 ), pp. 566–567; Eren ( 2015 ), pp. 1234–1235.

See Sect. 29.2 .

Thévenoz and Werro ( 2012 ), art. 164, N. 19.

See Sect. 29.3 .

Tekinay et al. ( 1993 ), p. 250; Thévenoz and Werro ( 2012 ), art. 164, N. 61; Tercier ( 2004 ), p. 307.

Tercier et al. ( 2016 ), p. 524; Oğuzman and Öz ( 2016 ), pp. 574–575; Eren ( 2015 ), p. 1238.

Oğuzman and Öz ( 2016 ), p. 577.

Feyzioğlu ( 1977 ), p. 641; Tekinay et al. ( 1993 ), p. 241; Oğuzman and Öz ( 2016 ), p. 575.

See Sect. 26.4 .

Tekinay et al. ( 1993 ), p. 251; Oğuzman and Öz ( 2016 ), pp. 577–578.

For further explanations, see Helvacı ( 2008 ).

Thévenoz and Werro ( 2012 ), art. 170 fn. 30, cf. Feyzioğlu ( 1977 ), p. 651; Tekinay et al. ( 1993 ), p. 260.

For further explanations see Çetiner ( 2010 ).

Eren ( 2015 ), p. 1240; Oğuzman and Öz ( 2016 ), p. 576; Oğuzman et al. ( 2016 ), p. 1049, compare to Thévenoz and Werro ( 2012 ), art. 170, N. 9.

Oğuzman and Öz ( 2016 ), p. 576; Nomer ( 2015 ), p. 450.

Feyzioğlu ( 1977 ), p. 651; Tekinay et al. ( 1993 ), p. 259; Oğuzman and Öz ( 2016 ), p. 578.

Thévenoz and Werro ( 2012 ), art. 170, N. 11; Oğuzman and Öz ( 2016 ), p. 578; Feyzioğlu ( 1977 ), p. 651; Tekinay et al. ( 1993 ), p. 260.

For further explanations see Günergök ( 2014 ).

Tercier ( 2004 ), p. 308.

Thévenoz and Werro ( 2012 ), art. 167, N. 21; Oğuzman and Öz ( 2016 ), pp. 582–583; Nomer ( 2015 ), p. 452; Reisoğlu ( 2014 ), p. 470.

Becker ( 1941 ), art. 168, N. 7; Engel ( 1997 ), p. 884; Thévenoz and Werro ( 2012 ), art. 168, N. 4; Feyzioğlu ( 1977 ), p. 656; Oğuzman and Öz ( 2016 ), pp. 583–584.

Öz ( 1990 ), pp. 57–58.

Tekinay et al. ( 1993 ), p. 252 ff ; Oğuzman and Öz ( 2016 ), p. 586; Eren ( 2015 ), p. 1241

See Sect. .

Thévenoz and Werro ( 2012 ), art. 169, N. 11; Feyzioğlu ( 1977 ), p. 658; Oğuzman and Öz ( 2016 ), p. 587; Eren ( 2015 ), p. 1241.

For further explanations see Engin ( 2002 ).

Oğuzman and Öz ( 2016 ), p. 591.

Oğuzman and Öz ( 2016 ), p. 593.

See Sect. 24.2 .

Tekinay et al. ( 1993 ), p. 266; Eren ( 2015 ), p. 1227; Oğuzman and Öz ( 2016 ), p. 596.

See Sect. 25.4.2 , fn. 43.

The transfer of possession is of a factual nature. The material transfer of possession must be complemented by the parties’ agreement (referred to as a real agreement) concerning the transfer of ownership or the constitution of rights in rem . The real agreement is a bilateral legal act and does not require any specific form. It may be formed by the parties’ express or implied declarations of will (intention).

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31 U.S. Code § 3727 - Assignments of claims

In subsection (a)(1), the words “or share thereof” and “whether absolute or conditional, and whatever may be the consideration therefor” are omitted as surplus. In clause (2), the word “authorization” is substituted for “powers of attorney, orders, or other authorities” to eliminate unnecessary words.

In subsections (b) and (c), the word “official” is substituted for “officer” for consistency in the revised title and with other titles of the United States Code.

In subsection (b), the words “Except as hereinafter provided” are omitted as unnecessary. The words “read and” are omitted as surplus. The words “to the person acknowledging the same” are omitted as unnecessary. The text of 31:203(1st par. last sentence) is omitted as superseded by 39:410. The words “Notwithstanding any law to the contrary governing the validity of assignments ” and the text of 31:203(last par.) are omitted as unnecessary.

In subsection (c), before clause (1), the words “bank, trust company, or other . . . including any Federal lending agency” are omitted as surplus. The words “of money due or to become due under a contract providing for payments totaling at least $1,000” are substituted for “in any case in which the moneys due or to become due from the United States or from any agency or department thereof, under a contract providing for payments aggregating $1,000 or more” to eliminate unnecessary words. The text of 31:203(2d par. proviso cl. 1) is omitted as executed. In clause (1), the words “in the case of any contract entered into after October 9, 1940 ” are omitted as executed. In clause (2)(A), the words “payable under such contract” are omitted as surplus. In clause (3), the words “true” and “instrument of” are omitted as surplus. The words “department or” are omitted because of the restatement. The words “if any” and “to make payment” are omitted as surplus.

In subsection (d), before clause (1), the words “During a war or national emergency proclaimed by the President or declared by law and ended by proclamation or law” are substituted for “in time of war or national emergency proclaimed by the President (including the national emergency proclaimed December 16, 1950 ) or by Act or joint resolution of the Congress and until such war or national emergency has been terminated in such manner” to eliminate unnecessary words. The words “ Department of Energy (when carrying out duties and powers formerly carried out by the Atomic Energy Commission)” are substituted for “Atomic Energy Commission” (which was reconstituted as the Energy Research and Development Administration by 42:5813 and 5814) because of 42:7151(a) and 7293. The words “other department or . . . of the United States . . . except any such contract under which full payment has been made” and “of any moneys due or to become due under such contract” before “shall not be subject” are omitted as surplus. The words “A payment subsequently due under the contract (even after the war or emergency is ended) shall be paid to the assignee without” are substituted for “and if such provision or one to the same general effect has been at any time heretofore or is hereafter included or inserted in any such contract, payments to be made thereafter to an assignee of any moneys due or to become due under such contract, whether during or after such war or emergency . . . hereafter” to eliminate unnecessary words. The words “of any nature” are omitted as surplus. In clause (1), the words “or any department or agency thereof” are omitted as unnecessary. In clause (2), the words “under any renegotiation statute or under any statutory renegotiation article in the contract” are omitted as surplus.

Subsection (e)(1) is substituted for 31:203(4th par.) to eliminate unnecessary words.

In subsection (e)(2), the words “person receiving an amount under an assignment or allotment” are substituted for “assignees, transferees, or allottees” for clarity and consistency. The words “or to others for them” and “with respect to such assignments , transfers, or allotments or the use of such moneys” are omitted as surplus. The words “person making the assignment or allotment” are substituted for “assignors, transferors, or allotters” for clarity and consistency.


  • assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.


In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Post-Loss Assignments of Claims Under Insurance Policies

In the settlement of lawsuits involving insured claims, it is not uncommon that one condition of the settlement is that the defendant assign his or her claims under all applicable insurance policies to the party that filed suit.

Indeed, it is frequently the case that the defendant, particularly when the defendant is an individual, has a limited ability to pay a judgment and insurance coverage offers the best opportunity for a recovery by the suing party. Usually, such settlements are made without any serious thought being given to whether the defendant’s claim against its insurer is assignable; the assumption being that it is assignable.

However, insurance policies generally have anti-assignment clauses which prohibit the assignment of the policy, or an interest in the policy, without the insurer’s consent. These clauses come into play in determining the validity or enforceability of the assignment of a claim under an insurance policy and should be considered when such an assignment is part of a settlement.

When considering the enforceability of anti-assignment clauses in insurance policies, the courts generally draw a distinction between an assignment made prior to the occurrence of a covered loss (a “pre-loss” assignment) and an assignment made after the occurrence of a covered loss (a “post-loss” assignment).

In analyzing pre-loss assignments, the courts recognize that requiring an insurer to provide coverage to an assignee of its policy prior to the occurrence of a covered loss would place the insurer in the position of covering a party with whom it had not contracted nor been allowed to properly underwrite to assess the risks posed by that potential insured, and, accordingly, determine the appropriate premium to charge for the risks being undertaken or choose to decline coverage.

Post-loss assignments, on the other hand, take place after the insurer’s obligations under its policy have become fixed by the occurrence of a covered loss, thus the risk factors applicable to the assignee are irrelevant with regard to the covered loss in question. For these reasons, the majority of the courts enforce anti-assignment clauses to prohibit or restrict pre-loss assignments, but refuse to enforce anti-assignment clauses to prohibit or restrict post-loss assignments.

Katrina Cases

The Louisiana Supreme Court, which had not previously addressed the enforceability of anti-assignment clauses for post-loss assignments, was recently confronted with this issue in the In re: Katrina Canal Breaches Litigation, litigation involving consolidated cases arising out of Hurricane Katrina. The issue arose as a result of a lawsuit brought by the State of Louisiana as the assignee of claims under numerous insurance policies as part of the “Road Home” Program. The Road Home Program was set up following Hurricanes Katrina and Rita to distribute federal funds to homeowners suffering damage from the hurricanes. In return for receiving a grant of up to $150,000, homeowners were required to execute a Limited Subrogation/Assignment agreement, which provided in pertinent part:

Pursuant to these Limited Subrogation/Assignments, the State of Louisiana brought suit against more than 200 insurance companies to recover funds dispensed under the Road Home Program. The suit was removed to Federal Court under the Class Action Fairness Act and the insurers filed motions to dismiss, arguing that the assignments to the State of Louisiana were invalid under the anti-assignment clauses in the homeowner policies at issue.

On appeal, the United States Fifth Circuit Court of Appeals certified the following question to the Louisiana Supreme Court: “Does an anti-assignment clause in a homeowner’s insurance policy, which by its plain terms purports to bar any assignment of the policy or an interest therein without the insurer’s consent, bar an insured’s post-loss assignment of the insured’s claims under the policy when such an assignment transfers contractual obligations, not just the right to money due?”

In answering this question, the Louisiana Supreme Court began by noting that, as a general matter, contractual rights are assignable unless the law, the contract terms or the nature of the contract preclude assignment. Specific to the certified question, Louisiana Civil Code article 2653 provides that a right “cannot be assigned when the contract from which it arises prohibits the assignment of that right.” The Louisiana Supreme Court observed that the language of article 2653 is broad and, on its face, applies to all assignments, including post-loss assignments of insurance claims. The Court, therefore, construed the issue confronting it as whether Louisiana public policy would enforce an anti-assignment clause to preclude post-loss assignments of claims under insurance policies.

In addressing the public policy question, the Louisiana Supreme Court recognized the distinction between pre-loss assignments and post-loss assignments discussed by courts from other states and noted that the prevailing view was that anti-assignment clauses were invalid and/or unenforceable when applied to post-loss assignments. Notwithstanding this weight of authority, the Louisiana Supreme Court stated:

“[W]hile the Louisiana legislature has clearly indicated an intent to allow parties freedom to assign contractual rights, by enacting La. C.C. art. 2653, it has also clearly indicated an intent to allow parties freedom to contractually prohibit assignment of rights. We recognize the vast amount of national jurisprudence distinguishing between pre-loss and post-loss assignments and rejecting restrictions on post-loss assignments, however we find no public policy in Louisiana favoring assignability of claims over freedom of contract.”

Thus, Court refused to invalidate the enforceability of the anti-assignment clauses to the post-loss assignments before it based on public policy, adding that public policy determinations are better suited to the legislature.

Nonetheless, after having recognized the general enforceability of anti-assignment clauses to post-loss assignments, the Court immediately placed limits on when those clauses would be applicable, stating that to be applicable, they “must clearly and unambiguously express that the non-assignment clause applies to post-loss assignments.” The Court refused “to formulate a test consisting of specific terms or words,” which would satisfy this condition and remanded the case to the federal courts to determine whether the individual anti-assignment clauses in the various policies were sufficiently clear and explicit to be enforced with respect to post-loss assignments at issue.

A Broad Application

It should be noted that the Court’s opinion appears to apply broadly to all post-loss assignments irrespective of what specific rights are being assigned, despite the fact that the certified question was narrower and asked only about the applicability of a post-loss assignment where the assignment “transfers contractual obligations, not just the right to money due.”

In a footnote at the beginning of its opinion, the Louisiana Supreme Court observed that in certifying the question to it, the Fifth Circuit “disclaimed any intent” that the Court “confine its reply to the precise form or scope of the legal questions certified.” The footnote indicates that the Court’s opinion was not intended to be limited to only those post-loss assignments involving the assignment of contractual obligations.

Louisiana has departed from the majority view in holding that as a matter of general law, anti-assignment clauses are not inherently void with regard to post-loss assignments. However, it may be that in practical application, the results of individual cases may well be consistent with the majority rule of not enforcing anti-assignment clauses with regard to post-loss assignments because Louisiana courts may be reluctant to find that the anti-assignment clauses are sufficiently “clear and explicit” unless they specifically state that they apply to post-loss assignments, notwithstanding the Louisiana Supreme Court’s unwillingness to “formulate a test consisting of specific terms or words.”

Topics Lawsuits Carriers Profit Loss Claims Louisiana Homeowners Hurricane

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Release of Claims

Jump to section.

Release of claims is an extensive procedure by which one party relinquishes all unknown and known claims against another party. It is generally utilized in settlement negotiations and can be a useful instrument in settling disputes. In addition, releasing claims is voluntary and can be started by either party. Furthermore, the release of claims is usually used in settlement negotiations to settle conflicts, such as employment disputes, personal injury claims, and contract disputes.

How Release of Claims Helps Resolve Disputes

Release of claims is a statutory document that expresses that a party decides to give up all claims against another person in exchange for something of worth. It is usually used in settlement negotiations to resolve disagreements, such as employment disputes, personal injury claims, and contract disputes.

Furthermore, the release of claims procedure starts with a negotiation between the parties concerned. The party seeking the release of the claim usually offers some consideration, such as money or another form of payment, to the other person in exchange for releasing all claims. Once both parties decide on the provisions of the release of claims, both parties draft and sign a written document. Moreover, the release of claims documents generally comprises the following:

  • The specific claims released
  • The names and addresses of the parties involved
  • The consideration being offered in exchange for the release
  • A statement that the release is unforced and that the party signing it comprehends its provisions
  • A provision that the release is binding on both parties and their heirs, successors, and assigns
  • A statement that the release is a final settlement of all claims, known and unknown, arising from the dispute

Release of Claims Advantages

The release of claims process has several advantages for both parties involved in the conflict. Some of the advantages include the following:

The release of the claims process can effectively resolve conflicts between parties. Both parties decide to fix their differences and move on by executing a release of claims. It can be especially helpful when the dispute is causing considerable pressure or monetary hardship for one or both parties. In addition, the release of claims can offer closure and help parties avoid the time and cost associated with litigation.

The release of claims provides certainty to both parties, as it eliminates the risk of future litigation or claims arising from the dispute. In addition, the release of the claims process can be kept confidential, which can be especially important in cases where reputational harm is a concern.

By executing a release of claims, parties have more authority over the result of their disagreement. Instead of leaving the outcome of their argument up to a magistrate or jury, parties can work jointly to come to a mutually advantageous resolution. It can be exceptionally valuable when parties want to keep an association after resolving the dispute, such as in business disputes.

A release of claims can save parties money and time. Litigation can be lengthy and costly, and releasing claims can deliver a quicker and more cost-effective solution. Also, releasing claims can help parties avoid the emotional toll that litigation can take on people and businesses.

Another advantage of a release of claims is that it can save parties from prospective legal action. Once a release of claims is executed, the releasing party cannot seek any further legal action against the released party. Doing this can be especially helpful for organizations that want to safeguard themselves from future legal action by former workers or companies that want to protect themselves from future legal action by clients or suppliers.

Employers usually use the release of claims to safeguard themselves from liability. When employees sign a release of claims, they give up their lawful privilege to sue the employer for any suits related to their employment. This comprises claims for discrimination, wrongful termination, or harassment. It is valuable for companies who want to avoid costly legal battles and protect their enterprise reputation.

Eventually, a release of claims can be customized to fulfill the specific requirements of both parties. It can comprise specific terms and conditions decided upon by both parties. This allows for higher flexibility in settling conflicts and can lead to a more satisfactory result for all parties involved.

assignment of future claims

Benjamin W.

assignment of future claims

Key Terms for Release of Claims

  • Claims: Allegations or requests made by one party against another for losses or damages incurred due to a particular incident or action.
  • Settlement Agreement : A lawfully binding contract between parties that summarizes the terms of a settlement, including the release of claims.
  • Waiver : An intentional and voluntary relinquishment of a legal privilege or claim.
  • Consideration: Something of worth provided in exchange for a release of claims, such as goods, money, or services.
  • Indemnification: A provision in a release of claims that demands one party to pay another party for any damages or losses that may occur.
  • Mutual Release: A release of claims executed by both parties, which allows both parties to release each other from suits or liabilities.

Final Thoughts on Release of Claims

In a nutshell, the release of claims is a useful tool in resolving conflicts between parties. It saves time and money, offers assurance and finality, maintains privacy and associations, and can be used in different contexts. And if you are involved in a conflict and are considering a release of claims, it is necessary to seek legal guidance to ensure that you comprehend the terms of the release and that your rights are safeguarded.

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An Assignor’s Release of Past, Present, and Future No-Fault Benefits Applies to His Assignee Unless the Insurer Receives Notice of the Assignment

Since the Michigan Supreme Court released its Covenant opinion [1] in 2017, Michigan courts have issued inconsistent decisions regarding a medical provider’s rights under an assignment after the assignor settles his claim for no-fault personal injury protection (PIP) benefits. The Michigan Court of Appeals heeded the calls for direction on this issue and approved Physiatry and Rehab Assoc v Alhalemi , ___ Mich App ___; ___ NW2d ___ (2020) (Docket No. 349465) , for publication on July 16, 2020. The Court held that an assignor’s settlement and release of all past, present, and future claims against his insurer is binding on his assignee unless the insurer receives a copy of the assignment before the settlement.

Background on Physiatry and Rehab Associates

Mohammed Alhalemi filed a lawsuit against his insurer, Westfield Insurance Company, seeking the payment of no-fault benefits for injuries that he sustained in a motor vehicle accident. While the lawsuit was pending, Alhalemi executed an assignment of benefits in favor of Physiatry and Rehab Associates, which provided medical services for Alhalemi after the accident. Subsequently, Alhalemi and Westfield entered into a facilitation settlement agreement. The following day, the parties executed a release, under which (1) Alhalemi released his rights to all past, present, and future claims for no-fault benefits arising out of the accident; (2) Alhalemi agreed to defend, indemnify, and hold Westfield harmless for any claims related to unpaid medical expenses (among other things); and (3) Alhalemi acknowledged full responsibility to pay liens, expenses, and/or benefits, including those claimed by a medical service provider.

After the settlement, Physiatry and Rehab Associates filed a separate lawsuit against Westfield, seeking the payment of no-fault PIP benefits as Alhalemi’s assignee. The trial court granted Westfield’s motion for summary disposition, reasoning that Westfield was released from liability under the terms of Alhalemi’s release. The court also held that Westfield was entitled to summary disposition because Physiatry and Rehab Associates failed to show that Westfield received written notice of its claim or the assignment of rights before the settlement.

The Court of Appeals’ Ruling

On appeal, the Court of Appeals affirmed the trial court’s grant of summary disposition.

First, the Court rejected Physiatry and Rehab Associates’ argument that the release only applied to the specific claims that Alhalemi included in his litigation against Westfield. It explained that, under the plain and unambiguous language of the release, Alhalemi relinquished all past, present, and future claims and agreed to pay all unpaid medical expenses.

Further, the Court of Appeals agreed with the trial court that Physiatry and Rehab Associates’ claim was barred due to lack of notice under MCL 500.3112. The provider needed to give Westfield a copy of the assignment of benefits before Westfield entered into the settlement agreement with Alhalemi in order to pursue a claim against Westfield after the release.

Impact of Physiatry Rehab and Associates

The Court of Appeals’ opinion is now binding precedent. It gives district and circuit courts a direct instruction for handling provider cases filed after an injured party settles their claims against a no-fault insurer. If a provider fails to give the insurer notice of its assignment before the insured settles and releases their claims, the provider can’t maintain a separate action to recover no-fault benefits. [2]

Physiatry and Rehab Associates will remain significant as provider litigation shifts in response to the Legislature’s amendment of MCL 500.3112. Under the amended statute, a medical provider can pursue a direct cause of action for no-fault benefits against an insurer without an assignment. This change may cause insurers and their attorneys to be wary as they settle PIP cases with insureds, fearing an influx of provider claims after the settlement. However, under Physiatry Rehab and Associates , a medical provider can’t maintain a separate action against an insurer unless it provides notice of its claim before the insured settles and releases their claims. This should give no-fault insurance companies greater confidence as they settle PIP cases with their insureds.

If you have questions about Physiatry and Rehab Assoc v Alhalemi or no-fault provider litigation more broadly, please feel free to contact the author, Zabbia N. Alholou . More information about Collins Einhorn’s General and Automotive Liability Practice Group is available here .

[1] Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co , 500 Mich 191; 895 NW2d 490 (2017).

[2] Relatedly, the Court of Appeals recently issued an unpublished opinion holding that the submission of a bill isn’t enough to provide notice of an assignment-based claim. Rather, the provider must provide notice of the assignment itself.

Zabbia N. Alholou

Zabbia N. Alholou

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Practical Law

Dispute resolution blog, drafting settlement agreements: do you know what claims you’re releasing.

  • by Jan O’Neill
  • Professional Support Lawyer

A crucial part of any agreement recording the settlement of a dispute is the description of the releases being given by one or both parties as part of the settlement .

A key issue for the parties to consider is whether the releases should extend to future claims and, in particular, claims that are unknown at the time of the settlement (either because the facts giving rise to the claim have not yet occurred or, more commonly, because they have occurred but the claimant is not aware or not fully aware of them).

In the interests of finality, parties will often wish to use the opportunity to put an end to all existing and potential disputes between them, and not just the dispute that has given rise to the settlement. However, this will not always be the case. Failure to properly address this issue in the drafting of releases can (and not infrequently does) result in a party discovering down the track that they are facing another round in a dispute they thought they had drawn a line under fully or, conversely, that they are precluded from pursuing a valuable claim that would otherwise have been available to them.

There is no legal obstacle to parties compromising claims of which they are unaware at the time of settlement and even claims of which they could not be aware. That much was made clear by the House of Lords in BCCI v Ali . However, that case is also authority for a “cautionary principle” that, in the absence of clear language, the court should be very slow to infer that a party intended to surrender rights and claims of which it was unaware and could not have been aware (in that case, because the claim only became recognised as actionable as a result of a retrospective development in the law after the date of settlement).

Nevertheless, in the context of the more common scenario where a further claim is pursued following some new factual circumstances coming to light after the settlement, three recent decisions suggest a quite narrow operation for that “cautionary principle”.

Known unknowns v unknown unknowns

In Brazier v News Group Newspapers and Leslie v News Group Newspapers , the claimants had entered into settlement agreements with the defendant newspaper group settling proceedings they had brought alleging phone hacking. They then sought to bring fresh claims relying on new evidence of alleged further hacking which had emerged after the settlement.

The releases in the settlement agreements were, on their face, drafted narrowly, by reference to the specific claim numbers of the original proceedings and with no mention of the releases covering future or unknown claims. The claimants argued that the further claims related to different and distinct instances of hacking to those alleged in the original proceedings and so were not encompassed within the releases.

In a judgment subsequently upheld by the Court of Appeal , the High Court rejected that argument, holding that the further claims had already been compromised, and struck out the claims.

Following a review of the pleadings in the original proceedings, the court held that the claims in those proceedings had been drawn widely enough that they (and therefore the releases) covered the new allegations. As the court emphasised, it was clear that the claimants were not totally ignorant of the possible further claims. They positively averred in the pleadings that there were wider phone hacking activities, though they could not particularise them. Accordingly, at the time of the settlement, the further hacking claims were matters of which they knew they were ignorant, that is, “known unknowns”. The court contrasted this with the situation in Ali , where the possibility of the further claim was an “unknown unknown”, because there was no basis to believe that such claims were actionable at law as at that date.

In this case, the claimants’ clear statement that they were aware of the possibility of further claims (and the fact that they elected to compromise their claims before awaiting disclosure that may have provided the missing details) makes the result fairly unsurprising. However, even in a case where there are no such clear statements, there is clearly the potential for a release drafted by reference to specific proceedings to apply to a broader range of conduct than may have been the focus of the parties’ attentions in the proceedings, depending on how broadly the pleadings have been drawn.

How much knowledge is required?

By contrast, in Khanty-Mansiysk Recoveries Ltd v Forsters LLP , there was no dispute that the claimants were, at the time of the earlier settlement, totally ignorant of the facts giving rise to the further claims they were now pursuing. Nevertheless, the release was held to have caught those claims.

A company and one of its directors had entered into a settlement agreement with a firm of solicitors in a dispute over the solicitors’ unpaid fees. The release expressly extended to any claims or potential claims, whether or not within the contemplation of the parties, arising out of or in connection with the solicitors’ invoice. Some time later, alleged deficiencies in the work performed by the solicitors came to light and an action alleging breach of contract and professional negligence was brought. The defendants relied on the earlier release as having compromised those claims.

The High Court held that the negligence claims were sufficiently connected to the solicitors’ invoices to fall within the express wording of the releases. Notably, the court observed that, although the grounds for the negligence claim were not suspected at the time of the settlement, an objective bystander would not have said that such claims were impossible and could not have been within the parties’ contemplation. To that extent, the judgment appears to treat the professional negligence claims as akin to a “known unknown”; in other words, they were among the type of claims that one might contemplate a client could have against a firm of solicitors in relation to work performed by the solicitors, but of which they knew they had no knowledge. This was in contrast to the “unknown unknown” in Ali .

Releasing fraud-based claims

It is widely accepted that the cautionary principle referred to in Ali in respect of unknown claims should also apply with even greater force to fraud-based claims (see for example Satyam Computer Services Ltd v Upaid Systems Ltd ).

However, the recent decision in Tchenguiz v Grant Thornton UK LLP illustrates that the principle has its limits even in the fraud context.

In the course of the Serious Fraud Office’s (SFO) investigation into the collapse of the Icelandic Kaupthing Bank, the defendant (who was a member of the bank’s winding up committee) was said to have made allegations to the SFO that the claimants had engaged in criminal behaviour in their dealings with the bank. The SFO investigation was ultimately discontinued without any findings against the claimants and they entered into a settlement agreement with the defendant in respect of their dealings with the bank, including a restructuring of loans. However, they subsequently sought to pursue a further action in the High Court against the defendant in respect of its involvement in the SFO investigation, including claims of conspiracy and malicious prosecution.

In considering whether the claims had already been compromised, the court noted the principles set out in Ali and Satyam . However, it distinguished Satyam on the basis that the background to this claim made it quite different to a normal commercial settlement, where it would usually be reasonable to expect that the party giving the release would have baulked at any suggestion at the time that it was giving up its rights regarding any undisclosed fraud.

In this case, the releases in the settlement agreement were broad ranging, by reference to various subject matters including “investigations carried out by any authorities” and ”the provision of any documents or information to any authority”. Further, they expressly included unknown claims. In the court’s view, given the SFO investigation, the parties must have had in contemplation claims alleging deliberate wrongdoing, as these were just the type of allegation likely to be asserted in any attempt by the claimants to ground a claim against this defendant. Indeed, the court thought it difficult to see any other basis for such a claim. Accordingly, it was held that the claims had been released.

In summary, all three recent decisions acknowledged the caution expressed in Ali regarding the release of unknown claims, but nevertheless proceeded to rule that the claims in question had in fact been released, despite the fact that they (or at least the details of them) were unknown at the time of settlement.

The decisions illustrate that, in all cases, it will be a question of the court comparing the release against the nature of the claim subsequently being pursued, to assess whether a reasonable observer at the time would have thought the further claims were included, taking into account the wording used, the relevant context and the facts known to the parties. They suggest that key considerations will include:

  • Whether or not the releases expressly included claims not currently known or contemplated. While this factor was not solely determinative in any of the three cases, it is highly advisable that such wording be included if this is what is intended, in order to limit the potential for arguments based on the Ali cautionary principle.
  • In cases where the release is drafted by reference to specific proceedings, the scope of those proceedings. It will be important to consider what factual scenarios and causes of action could feasibly have been pursued in those proceedings based on the state of the pleadings, even if those issues had not been the focus of the proceedings by the time settlement was reached.
  • Whether the further claims are among the type of claims that the parties might have contemplated as a possibility, given the nature of their dealings.

The bottom line is that the parties on both sides of a settlement release should ensure that they are clear as to what they intend the release to cover with respect to unknown claims and make this explicit in the drafting where possible.

One thought on “ Drafting settlement agreements: do you know what claims you’re releasing? ”

Jan, I agree that it’s good to make sure things are clear when you’re drafting a settlement. It wouldn’t surprise me if it was common for mistakes to happen. Drafting settlement sounds like it can be tedious work.

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Israel attacks Rafah after Hamas claims responsibility for deadly rocket attack

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Mourners react next to the bodies of Palestinians killed in an Israeli strike, at Abu Yousef al-Najjar hospital in Rafah

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May 5, 2024

Self-Driving Trucks Claim Climate Benefits

The autonomous trucking industry says its self-driving vehicles can cut carbon emissions by reducing fuel use, though some groups have raised safety questions

By Mike Lee & E&E News

A worker directs an Aurora Innovation Inc. driverless truck

A worker directs an Aurora Innovation Inc. driverless truck at the company's terminal in Palmer, Texas, US, on Wednesday, Dec. 28, 2023.

Dylan Hollingsworth/Bloomberg via Getty Images

CLIMATEWIRE | Self-driving trucks represent the future of freight transportation, advocates say. And to help ensure there is a future — at least for humanity — they argue that autonomous trucks can help fight climate change by reducing fuel consumption.

A new estimate, funded by one of the biggest players in the autonomous trucking sector, says self-driving trucks could cut fuel use 13 percent to 32 percent compared with standard diesel trucks. The findings come amid a broader campaign to build support among regulators and Congress for the technology, which backers say is getting close to reality.

The potential payoff is huge — trucking is a $1 trillion business in the U.S. alone , according to Aurora Innovation, the company that paid for the fuel-efficiency research. For freight carriers, autonomous trucking offers the promise of bigger profit margins because they won't have to pay human drivers.

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Aurora and like-minded companies such as Kodiak Robotics Inc. and Gatik AI have tested self-driving trucks for more than a year. With a safety driver behind the wheel, autonomous trucks have run routes in and around Dallas, and between points as distant as Houston, Atlanta and El Paso.

All three companies say they plan to start making deliveries in fully autonomous trucks without a human driver sometime this year. Most states already allow self-driving trucks, either explicitly or implicitly, according to Aurora.

“As autonomous trucks make hauling freight safer, we have a responsibility to make logistics more sustainable as well," said Garrett Bray, a product director at Aurora who wrote the paper. "Self-driving technology can fight climate change by increasing energy efficiency and reducing emissions in the supply chain.”

Transportation is the biggest source of greenhouse gas pollution in the U.S., and trucking makes up about a fourth of the transportation industry’s emissions.

Already, there are efforts to electrify the trucking industry — without or without drivers. But the AV industry says it can make a significant dent in emissions from diesel-powered trucks, according to the industry-funded report.

The biggest improvement would come from running trucks at lower speeds, the paper said.

Typically, trucks have to stick to a precise schedule because drivers can work only a limited number of hours before federal regulations require them to take a rest break. A self-driving truck can lumber along at a lower speed, and still reach its destination faster by skipping the breaks.

Self-driving trucks also won’t have to idle as much when they’re stopped, since they don’t require an air-conditioned cab. Likewise, they don’t rack up “deadhead miles” returning home at the end of a shift, and they don’t have to detour for bathroom breaks or food.

Some of the fuel savings will be offset by the power needed to run the autonomous system’s sensors and computers. And the sensors, which are mounted on the outside of the truck, will create more aerodynamic drag.

But the paper estimated those drawbacks will be small, compared with the overall fuel savings.

The report, which wasn't peer-reviewed, builds on previous industry estimates that say self-driving trucks could cut emissions by 10 percent.

That's been one of the industry's selling points as it makes its case to the Federal Motor Carrier Safety Administration and the White House Office of Management and Budget.

The Federal Motor Carrier Safety Administration, which oversees the industry, is preparing to introduce a regulation on self-driving trucks, which is being reviewed by the White House Office of Management and Budget. The agency has been gathering information on automated trucks for more than five years, through a listening session and two notices of proposed rulemaking.

Through it all, industry advocates have attested to their safety — and their potential to cut planet-warming pollution.

“ Study after study demonstrates AVs improve roadway safety," Jeff Farrah, chief executive of the Autonomous Vehicle Industry Association, said in an email.

“For states like California — where the transportation sector represents nearly 50% of all greenhouse gas emissions — this research demonstrates that AV trucks like Aurora’s can play a pivotal role in reducing carbon emissions."

The fuel savings that Aurora claims are in line with what other research has shown about automation, said Raj Rajkumar, a professor at Carnegie Mellon University who studies the topic.

The trucks can be programmed to accelerate and decelerate gently, and their mapping systems allow them to adjust for hills and curves ahead of time.

“You can program the AV to have basically a pretty fuel-efficient profile,” he said.

The environmental benefits create an opportunity for the federal government; it could mandate slower operating speeds when it writes future regulations on self-driving trucks, said Parth Vaishnav, a professor at the University of Michigan.

“The firms would see fuel cost reductions, they would still see an increase in productivity and there would be safety and environmental benefits,” he said. “It would be the government asking the truck operators to share some of the gains they would make from automation.”

Safety is a top concern

To be clear, the environmental benefits of autonomous trucking are tiny compared with the financial gains that trucking companies would see from running trucks without a driver at the wheel. In addition to saving the driver’s salary, the trucks could operate almost twice as many hours in a day.

But like self-driving cars, autonomous trucks are being scrutinized for their safety record — and perhaps more so because of their greater potential for harm.

The industry says self-driving trucks can operate more safely than human drivers, and it says companies have logged millions of miles without the high-profile mistakes and public anger that have accompanied the rollout of self-driving passenger cars.

“We are well aware of the microscope we operate under,” said Dan Goff, director of external affairs at Kodiak.

Still, highway safety groups and unions have been pressing the FMCSA to move carefully.

So far, most autonomous vehicles on the road have been passenger cars, traveling at relatively slow speeds on city streets.

Long-distance trucks can weigh up to 80,000 pounds, roughly 20 times larger than a typical car, and move at speeds up to 75 mph on some rural roads. There haven’t been any serious crashes involving automated trucks, but the consequences could be tragic, said Cathy Chase, executive director of Advocates for Highway Safety.

The group is pushing for FMCSA to hold off allowing self-driving trucks until the technology is proven, and until the federal agency can write rules for the new technology. To date, most of the research about self-driving trucks has been conducted by the industry.

“Our organization is not comforted by the fact that these companies are saying that they're going to be safe and improve efficiency or the environment,” Chase said.

Unions including the Teamsters and AFL-CIO have fought against self-driving trucks, saying they’re unsafe and would put drivers out of work. The Teamsters say autonomous trucks shouldn’t be sold until safety standards are in place, and they argue there must be a requirement to keep a human driver in the cab.

"AV companies haven't demonstrated to the general public that they're anywhere close to having a viable product that's anywhere close to being as good as a professionally trained human operator," Matthew McQuaid, a Teamsters spokesman, said in an email. "If these companies can't do that, fully driverless trucks shouldn't be allowed on public roads. Full stop."

The Teamster pushed for a bill in California last year that would’ve required a licensed commercial driver in self-driving trucks, but Gov. Gavin Newsom vetoed it.

The trucks use lidar and other sensors that can detect problems farther away than a human driver typically can. Their driving systems, powered by artificial intelligence, can pick up lessons that might take a human driver decades to learn, and also share real-time information among trucks in the same fleet about road conditions or obstacles.

So far, the trucks have been used only in preset “operational design domains” — meaning routes the companies have previously mapped. The trucks are typically monitored from a control room, where the company staff can track each vehicle and intervene if there’s an emergency.

Another selling point is that self-driving systems are programmed to drive conservatively.

On a recent visit, Kodiak took a guest on a test drive on some of the busiest highways in Dallas. The truck had a safety driver at the wheel, but he never touched the controls as the truck pulled out of the company’s lot, merged onto a highway and negotiated Dallas traffic.

Faced with drivers weaving in and out of lanes, the truck simply slowed down. When it encountered a broken-down vehicle on an access road, it pulled to one side. That sort of driving is not only safer, it's more fuel-efficient and it creates less wear and tear on the truck, Kodiak said.

Gatik, which specializes in “middle-mile” trucking between warehouses and grocery stores, said automation allows its trucks to avoid trouble spots: school zones, hospitals, downtown areas.

“If the route takes seven minutes longer because that’s the safest route, a bag of groceries won’t complain about the extra seven minutes,” Rich Steiner, Gatik’s vice president of government relations, said in an interview.

Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2024. E&E News provides essential news for energy and environment professionals.


New York Mets Owner Hints at Future Prospect Call-Ups

Jon conahan | may 6, 2024.

Jun 28, 2023; New York City, New York, USA; New York Mets owner Steve Cohen speaks to the media

  • New York Mets

The New York Mets promoted Christian Scott to the big league roster, making his debut over the weekend. The big right-handed pitcher allowed one earned run in 6 2/3 innings, striking out six and walking one.

Scott, a fifth-round pick by the Mets in 2021, impressed at the minor-league level before getting called up. He owned a 3.30 ERA in 33 starts and 45 appearances.

New York, 3-7 in their last 10 games, is hitting another rough patch after playing well in the first month of the season. Their lack of success could certainly be why Scott was called up, although one could argue that he deserved to no matter what.

With a 16-18 record and 7.5 games out of first place in the National League East, it's tough to imagine a scenario where the Mets are fighting for a playoff spot this season. Given that's now a reality for this front office, that might be a reason for them to give other prospects a chance to prove their worth.

Steve Cohen took to X on Sunday, signaling that more prospects could be on the way.

Tough weekend in Tampa. It can be frustrating but these are the ebbs and flows of a season . Prospect- wise , I love how aggressive we are promoting our young talent at all levels . There are lots of new names that make our future bright. LGM — Steven Cohen (@StevenACohen2) May 6, 2024

Cohen didn't name any player, but given he "loved" the aggressiveness out of the front office promoting these players, it should be an indication of what's to come.

It's uncertain who would get the call next. Jett Williams, Drew Gilbert, Luisangel Acuna, and Blade Tidwell are top 10 prospects with an ETA in 2024 or 2025, according to MLB.com .

Entering the season, this year was viewed as one to build for next season. Whether that was building confidence or finding players who could be a part of the team when Cohen spends money next season, there's hope that they find players they're looking to keep. Prospects could be just that, and for much cheaper than much of the roster.

Jon Conahan



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