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The Effect of the Sale of a Commercial Property on a Pending Insurance Claim

Gary Thompson is a partner with the law firm of Reed Smith, LLP, in Washington, DC. The views herein do not necessarily reflect those of the firm, its attorneys, or its clients, or with regard to any pending cases. A D J U S T I N G T O D A Y the claim to recover the loss may be effectively assigned by the in- sured, even without the consent of the insurer, so as to vest in the assignee the absolute right to the insurance, provided, of course, the insured himself had that right at the time when the loss was in- curred, and the assignment itself was otherwise valid. 17 The common explanation was repeated by the World Trade Center Properties court: “‘Before loss, the insurer is subjected to a risk which the insurer may exempt from as- signability except upon its own consent. Upon loss, however, the risk disap- pears and nothing remains except the assured’s right to payment – a mere chose in action which may be assigned without the limitations of any other chose in action.’” 18 As noted above with respect to Bronx Entertainment and other cases, the purchaser cannot assert new rights of its own that did not belong to the seller/assignor. But whatev- er the extent of the seller’s claim—it is fully assignable, in whole or in part. The assignee can then col- lect the value of that seller’s claim against the insurer. Conclusion When a commercial property is sold in the middle of a claim, some insurers look at this as an opportu- nity to blunt their obligations. But there is nothing about the sale of a property that provides an insurer with the opportunity to sidestep its payment obligations. Policyholders should insist that in- surers adhere to their obligations. Policyholders should also carefully address assignment or other insur- ance-related language in purchase and sale agreements, loan docu- ments, and other writings related to the transaction. ADJUSTERS INTERNATIONAL Corporate Office 126 Business Park Drive Utica, New York 13502 1-800-382-2468 Outside U.S. (315) 797-3035 FAX: (315) 272-2054 ADJUSTING TODAY is published as a public service by Adjusters International, Inc., disaster recovery consultants. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases. PRINTED ON RECYCLED PAPER AT07-1 3031 © 2007 Adjusters International. All rights reserved. PUBLISHER Ronald A. Cuccaro, SPPA EDITOR Judith A. Finn WEB SITE ADDRESSES 18 SR International Business Ins. Co. Ltd. v. World Trade Center Properties, LLC, et al. , 394 F.Supp.2d at 593, citing Beck-Brown Realty Co. v. Liberty Bell Ins. Co. , 241 N.Y.S. 727 (Sup. Ct. Kings Cty. 1930).