Maryland Supreme Court: Insurer Must Honor Post-Loss Claim Assignments Despite Anti-Assignment Clause

The Supreme Court of Maryland recently issued a significant ruling regarding the enforceability of anti-assignment clauses in insurance policies. In the 2025 case In re Petition of Featherfall Restoration, LLC, the court clarified that while insurance policies may include anti-assignment provisions, these do not necessarily prohibit the assignment of a post-loss claim under the policy.

The distinction made is between the insurance policy itself and the claim arising from it, with the latter deemed an assignable "chose in action," or a specific property interest. The dispute originated when two homeowners assigned their claim for roof damage, denied by Travelers Home and Marine Insurance due to alleged wear and tear, to Featherfall Restoration, LLC. Travelers refused to recognize the assignment based on the anti-assignment clause in the policy. Upon judicial review, the Maryland Supreme Court ruled that this clause did not extend to the assignment of post-loss claims, which should be handled as if asserted directly by the policyholders.

The decision emphasizes a nuanced understanding of policy language and the legal concept that claims under a policy are distinct from the policy contract itself. This ruling impacts how insurers, policyholders, and service providers approach claim assignments, particularly in states recognizing "chose in action" rights. Insurers should reassess their policy terms and claims processing practices to align with this interpretation and mitigate potential disputes. Legal and regulatory professionals in the insurance industry should track subsequent implications for policy form language and claims administration compliance standards in Maryland and possibly other jurisdictions.