Opinion
No. FBT-CV-10-6005996
May 24, 2010
MEMORANDUM OF DECISION
The plaintiff, No More Waiting, LLC, a Delaware limited liability company with offices in West Palm Beach, Florida, has filed an application to approve a transfer by the named defendant, Patricia Hack, of a portion of future payments due to her under an annuity contract issued by Allstate Life Insurance in furtherance of a structured settlement agreement between Patricia Hack and Allstate Assignment Company. The settlement resolved a workers' compensation claim filed by Hack. In the present action, Hack proposes to transfer to the plaintiff a portion of the remaining monthly payments due to her under the settlement agreement in consideration for her being paid a lump sum amount of money based on a present value figure. Allstate Assignment Company and Allstate Life Insurance Company (collectively Allstate) have filed an appearance in the action and oppose the proposed transfer of a portion of Hack's future payments claiming that the plaintiff cannot validly assign them. More particularly, Allstate primarily asserts that the proposed transaction violates the antiassignment provision in the settlement agreement and contravenes General Statutes § 31-320, which provides that workers' compensation payments are nonassignable.
Although Hack has not filed an appearance in the action, she was present at the hearing on the application and apparently was prepared to testify, among other things, that the proposed transfer would be in her best interests.
In its memorandum of law in support of its application, the plaintiff claims that "[a]s a threshold matter, Allstate is not a party to the underlying Settlement Agreement. The only parties to that Agreement were Ms. Hack, [AMR], and AIG Insurance Company. Allstate's only relationship to the Settlement Agreement is by virtue of the Qualified Assignment whereby Allstate took an assignment of the obligation to make the Periodic Payments to Ms. Hack, or her assignee." Notwithstanding that assertion, the plaintiff fails to make any resulting legal argument. To the extent that the claim is that Allstate lacks standing, the court need not decide the issue. General Statutes § 52-225k(b) provides, in pertinent part, that notice of the proposed transfer be served on all interested parties. The term "interested parties" is defined to include the annuity issuer and the structured settlement obligor, which in this case are Allstate Assignment Company and Allstate Life Insurance Company, respectively. Allstate is authorized by statute to appear in court to oppose the plaintiff's application. General Statutes § 52-225k(5).
The material facts are not in dispute. Hack filed a workers' compensation claim against American Medical Response (AMR) claiming that she sustained work-related injuries over a few years period of time. In January 2009, Hack settled her workers' compensation claim against AMR for the amount of $160,000 by entering into a Stipulation for Agreement and Award with AMR and its workers' compensation carrier, AIG Insurance Company. She was paid $60,000 upon execution of the agreement and agreed to accept periodic payments in the amount of $738.78 per month guaranteed for fifteen years. The agreement contains antiassignment language that provides that the defendant "shall not have the power to sell or mortgage or encumber said periodic payments, or any part thereof, nor anticipate the same, or any part thereof, by assignment or otherwise." The agreement further provides in a separate paragraph that the periodic payments could not be "[s]old, assigned, pledged, hypothecated or otherwise transferred or encumbered, either directly or indirectly, unless such sale, assignment, pledge, hypothecation or other transfer or encumbrance (any such transaction being hereinafter referred to as a "Transfer") has been approved in advance in a "Qualified Order" as defined in Section 5891(b)(2) of the Code (a "Qualified Order") and otherwise complies with applicable state law, including without limitation any applicable structured settlement protection statute."
By pleading dated January 13, 2010, the plaintiff filed an application for approval of a transfer to it of Hack's structure settlement payment rights. Specifically, the plaintiff brought an action pursuant to General Statutes § 52-225f et seq. (commonly referred to as the Transfer Act) seeking approval of the transfer to it of the defendant's right to a certain portion of the remaining annuity payments. Allstate filed an objection to the plaintiff's application. The crux of Allstate's claim is that Hack is prohibited by both the antiassignment language in § 31-320 and the language in the settlement agreement from transferring a portion of her future payments to the plaintiff in consideration of being paid a lump sum. The plaintiff counters that the proposed transfer does not violate the workers' compensation law embodied in § 31-320 because the definition of "structured settlement" in § 52-225g(13) includes "periodic payments in settlement of a workers' compensation claim," and the settlement agreement expressly permits that defendant to transfer her payments provided she obtains a court order approving them under the Transfer Act.
The court will first consider the plaintiff's claim that the language of the Transfer Act invalidates antiassignment provisions in structured settlement agreements. In Rumbin v. Utica Mutual Ins. Co., 254 Conn. 259, 265, 757 A.2d 526 (2000), the Supreme Court decided this precise issue and concluded that the language of the Transfer Act "does not abrogate the common law right to include an antiassignment provision in such an agreement or annuity." The Court stated that "the language of [the Transfer Act] contains no clear expression of legislative intent to alter the common law." Id., 266.
The court will next consider whether, under Connecticut common law, the antiassignment provision in the settlement agreement in the present action precludes Hack's proposed transfer of a portion of her right to future payments to the plaintiff. Again, the Rumbin case is directly on point. That case involved an appeal by an annuity company, Safeco Life Insurance Company, from the judgment of the trial court approving the plaintiff's transfer of payments due to him under an annuity issued in accordance with a structured settlement agreement between the plaintiff and Utica Mutual Insurance Company. Id., 260. The settlement concluded the plaintiff's claim for personal injuries by way of the plaintiff receiving from Utica Mutual a lump sum payment followed by periodic payments over a fifteen-year period. Id., 263-64. Safeco issued the annuity contract, which provided that "[n]o payment under this annuity contract may be . . . assigned . . . in any manner by the [plaintiff] . . ." Id., 264.
Due to an adverse change in financial circumstances subsequent to the settlement, the plaintiff sought to transfer to a company, J.G. Wentworth, his right to the remaining annuity payments. Id. Safeco objected to the assignment on the basis of the antiassignment provision in the annuity contract. Id. The trial court disagreed and found that the Transfer Act "invalidated antiassignment provisions and allowed payees to transfer their rights to future payments under structured settlement agreements when the statutory requirements were met." Id., 265. Consequently, the court rendered judgment approving the transfer of the plaintiff's annuity payments to Wentworth.
On appeal, Safeco claimed that, under Connecticut common law, the antiassignment provision in the annuity contract issued by Safeco invalidated the plaintiff's assignment of his right to future payments under the contract to Wentworth. Id., 262-63. "The primary issue raised by this case is whether, under Connecticut common law, an antiassignment provision in an annuity contract invalidates the plaintiff payee's transfer of his right to future payments under the annuity to a third party. We conclude, in accordance with case law and § 322 of the Restatement (Second) of Contracts, that the antiassignment provision at issue here does not render the assignment of the annuity ineffective, but, instead, gives the annuity issuer, Safeco, the right to recover damages for breach of the antiassignment provision." Id., 267. In reaching its conclusion, the court acknowledged a split of authority in other jurisdictions interpreting antiassignment clauses. Id., 268-74.
In interpreting antiassignment clauses, the majority of jurisdictions now distinguish between the assignor's `right' to assign and the `power' to assign (modern approach). For example, in Bel-Ray Co. v. Chemrite (Pty.) Ltd., 181 F.3d 435, 442 (3d Cir. 1999), the United States Court of Appeals for the Third Circuit recognized that numerous jurisdictions followed the general rule `that contractual provisions limiting or prohibiting assignments operate only to limit [the] parties' right to assign the contract, but not their power to do so, unless the parties manifest an intent to the contrary with specificity.' (Emphasis added.) The court concluded, however, that the `assignment clauses [did] not contain the requisite clear language to limit [the] "power" to assign' and, therefore, held the assignment valid and enforceable. Id., 443. The court acknowledged that contracting parties could limit the power to assign by including an `assignment provision [that] generally state[s] that nonconforming assignments (i) shall be "void" or "invalid," or (ii) that the assignee shall acquire no rights or the nonassigning party shall not recognize any such assignment.' Id., 442. Without such express contractual language, however, `the provision limiting or prohibiting assignments will be interpreted merely as a covenant not to assign . . . Breach of such a covenant may render the assigning party liable in damages to the non-assigning party. The assignment, however, remains valid and enforceable against both the assignor and the assignee.' Id.
Many other courts similarly have held that an antiassignment provision that limits the right to assign does not void an assignment between an assignor and assignee unless there is also an express provision limiting the power to assign or a provision voiding the assignment itself. (Emphasis in original.)
Id., 268-69.
The Court noted that the modern approach is not followed in the minority of jurisdictions "which uphold antiassignment clauses regardless of whether the parties have included contractual language that expressly limits the power to assign or expressly invalidates the assignment itself." Id., 272. "These courts ignore the rule adopted by the majority of jurisdictions, which requires that in order to invalidate the assignment, the parties must include in their antiassignment provision language that specifically limits the power to assign or invalidates the assignment itself." Id., 273-74.
Based on its adoption of the modern approach, the Court in Rumbin found that the antiassignment clause in the annuity contract "limited the plaintiff's right to assign, but not his power to do so. The provision did not contain any express language to limit the power to assign or to void the assignment itself." (Emphasis in original.) Id., 277. Therefore, the Court affirmed the judgment of the trial court concluding that the plaintiff's assignment of his right to future payments under the annuity contract was valid and noting that Safeco could bring a damage action based on breach of the contract against the plaintiff. Id., 277-78.
The settlement agreement in the present action contains an antiassignment clause that provides that Hack "shall not have the power to sell or mortgage or encumber said periodic payments, or any part thereof, nor anticipate the same, or any part thereof, by assignment or otherwise." The agreement expressly restricts the defendant's power to assign the periodic payments that she is entitled to receive under it. In accordance with the Rumbin decision and the modern view it adopts, such an assignment is legally invalid.
The plaintiff attempts to distinguish the present action from Rumbin contending that the following language in the agreement allows the defendant to assign her payments provided that she obtains a "Qualified Order" from the court. In this regard, the agreement further provides that the periodic payments can be "[s]old, assigned, pledged, hypothecated or otherwise transferred or encumbered, either directly or indirectly, unless such sale, assignment, pledge, hypothecation or other transfer or encumbrance (any such transaction being hereinafter referred to as a "Transfer") has been approved in advance in a "Qualified Order" as defined in Section 5891(b)(2) of the Code (a "Qualified Order") and otherwise complies with applicable state law, including without limitation any applicable structured settlement protection statute." The plaintiff asserts in its memorandum of law that the agreement "provides that the payments are assignable if [the defendant] first obtains court approval of the transfer pursuant to the state structured settlement transfer statute." The court disagrees.
"[W]hen the intention conveyed [in a written contract] is clear and unambiguous, there is no room for construction . . . Extrinsic evidence is admissible to assist the court in resolving the question of intent where the terms of a contract are either latently or patently ambiguous. (Citations omitted; internal quotation marks omitted.) Murphy, Inc. v. Remodeling, Etc., Inc., 62 Conn.App. 517, 525 n. 6, 772 A.2d 154 (2001); Kronholm v. Kronholm, 16 Conn.App. 124, 131, 547 A.2d 61 (1988).
In the present case, the terms referencing the "Qualified Order" were neither latently nor patently ambiguous. They clearly provide that the defendant cannot assign her payments unless the assignment "has been approved in advance in a "Qualified Order" . . . and otherwise complies with applicable state law . . ." (Emphasis added.) The assignment to the plaintiff violates the common law of the state of Connecticut enforcing antiassignment provisions such as the one in the present action that expressly limit the defendant's power to assign her periodic payments. The antiassignment clause and the clause concerning the necessity of a Qualified Order exist harmoniously in the settlement agreement to the extent that they preclude the defendant from seeking to validly assign her periodic payments to the plaintiff.
In view of the foregoing, the plaintiff's application (100.30) seeking the court's approval of the proposed transfer of a portion of Hack's future structured settlement payments is denied. As a result of the court's conclusion, the court need not address the other issues raised by Allstate challenging the approval of the transfer.