PROPERTY PROVISIONS & CONTRACT LAW · 6 MIN READ

Assignments, Loss Payees, and Mortgagee Rights

Because insurance is a personal contract — the insurer underwrote a specific insured's moral and physical hazard — the policy itself cannot be assigned before a loss without the insurer's consent, and anti-assignment clauses are enforced to that extent. But the analysis flips after a loss. Once a covered loss occurs, the claim becomes a chose in action: a matured right to a fixed sum of money. The insurer's risk has crystallized, and a different payee changes nothing about its exposure, so most courts enforce post-loss assignments of proceeds to contractors, restoration firms, and public adjusters despite standard no-assignment language. Distinguish assignment from novation: an assignment transfers rights without releasing the assignor, while a novation substitutes a new party with the consent of all original parties and extinguishes the old obligation — which is why a successor entity that wants to truly step into a predecessor's policy needs the insurer's agreement. Lender protection is a hierarchy of clause strength. A simple loss payable clause makes the lender a payee with purely derivative rights: any defense good against the insured — arson, material misrepresentation, breach of condition — defeats the payee too. The standard (union) mortgage clause sits at the top: it creates an independent contract between insurer and mortgagee, so the lender collects up to its insurable interest even when the named insured's own misconduct voids the policy, provided the lender performs its own duties — notifying the insurer of known increases in hazard, paying premium the insured fails to pay, and submitting proof of loss on demand. The lender's loss payable option extends the same independent-contract protection to equipment and chattel financing. Keep the categories straight: a loss payee or mortgagee holds rights to property proceeds, while an additional insured is a party actually insured under a liability policy — different statuses answering different contractual needs. General contract doctrines round out the section because the exam borrows them freely. Anticipatory repudiation lets the insured treat an insurer's unequivocal refusal to perform as an immediate total breach — suing at once, excused from further premium tender. Frustration of purpose discharges remaining duties when a supervening event destroys the contract's principal purpose without either party's fault, even though performance remains technically possible. Mutual mistake supports reformation of a policy that fails to express the parties' actual agreement, while unilateral mistake rarely does. Accord and satisfaction, election of remedies, substantial performance, and the enforceability line between liquidated damages and penalties complete the toolkit — each a one-question doctrine testable on its definition.