Rumbin v. Utica Mutual Insurance
757 A.2d 526, 254 Conn. 259, 2000 Conn. LEXIS 277 (2000)
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Rule of Law:
A contractual provision prohibiting the assignment of rights, unless it specifically states that an assignment will be "void" or "invalid" or otherwise extinguishes the power to assign, does not render an assignment ineffective. Instead, such a provision creates a right for the obligor to sue the assignor for damages for breach of contract.
Facts:
- In April 1998, Marco Rumbin and Utica Mutual Insurance Company entered into a structured settlement agreement to resolve a personal injury claim.
- The agreement provided Rumbin with a lump sum followed by a series of periodic payments for fifteen years.
- Utica Mutual funded the periodic payments by purchasing an annuity contract from Safeco Life Insurance Company, with Rumbin as the beneficiary.
- The annuity contract issued by Safeco contained an "Assignment" provision stating, "[n]o payment under this annuity contract may be . . . assigned . . . in any manner by the [plaintiff]."
- Approximately six months later, Rumbin became unemployed and faced a mortgage foreclosure on his home.
- To resolve his financial difficulties, Rumbin agreed to sell his right to the remaining annuity payments to J. G. Wentworth in exchange for a lump sum.
Procedural Posture:
- Marco Rumbin filed a declaratory judgment action in the trial court, seeking approval to transfer his structured settlement payment rights to J. G. Wentworth.
- Safeco Life Insurance Company objected to the transfer, arguing it was barred by an antiassignment provision in the annuity contract.
- The trial court concluded that a state statute invalidated the antiassignment provision and rendered judgment approving the transfer.
- Safeco, as the appellant, appealed the trial court's judgment to the Appellate Court.
- The Connecticut Supreme Court then transferred the appeal to itself for review.
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Issue:
Does an antiassignment clause in an annuity contract that prohibits assignment but does not expressly state that assignments are "void" or "invalid" render the assignment of payment rights ineffective under Connecticut common law?
Opinions:
Majority - Vertefeuille, J.
No. An antiassignment provision that merely prohibits assignment only limits the assignor's right to assign, not their power to do so. To invalidate an assignment, a contract must contain express language stating that any assignment will be "void," "invalid," or that the assignee shall acquire no rights. The court adopts the modern approach, distinguishing between a covenant not to assign, the breach of which gives rise to a claim for damages, and a provision that extinguishes the power to assign. Because the clause in Safeco's annuity contract lacked such specific language, Rumbin's assignment to Wentworth is valid and enforceable, though it constitutes a breach of contract for which Safeco may seek damages.
Dissenting - Norcott, J.
Yes. An assignment of payment rights should be rendered ineffective by a clear and unambiguous antiassignment clause, regardless of whether it contains specific "magic words" like "void" or "invalid." The majority's holding imposes an arbitrary linguistic formula that undermines the freedom of contract. The plain language of the contract clearly expressed the parties' intent to forbid assignment, and this bargained-for term should be enforced to protect the obligor's interests, such as avoiding potential adverse tax consequences and administrative burdens.
Analysis:
This decision aligns Connecticut common law with the majority of jurisdictions that have adopted the 'modern approach' to antiassignment clauses, distinguishing between the 'right' and the 'power' to assign. It establishes a clear drafting requirement for parties who wish to make assignments completely ineffective: they must use explicit language such as 'void' or 'invalid.' This ruling promotes the free alienability of contract rights while preserving a remedy for obligors, thereby balancing commercial predictability with freedom of contract. Future disputes in Connecticut over the validity of assignments will now turn on the specific wording used in the antiassignment provision.
