what is assignment in claims

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40 U.S.C. 121(c) ; 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C. 3016 ); and 51 U.S.C. 20113 .

48 FR 42328 , Sept. 19, 1983, unless otherwise noted.

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Subpart 32.8—assignment of claims, 32.800 scope of subpart..

This subpart prescribes policies and procedures for the assignment of claims under the Assignment of Claims Act of 1940, as amended, ( 31 U.S.C. 3727 , 41 U.S.C. 6305 ) (hereafter referred to as the Act ).

[ 48 FR 42328 , Sept. 19, 1983, as amended at 51 FR 2665 , Jan. 17, 1986; 79 FR 24212 , Apr. 29, 2014]

32.801 Definitions.

Designated agency, as used in this subpart, means any department or agency of the executive branch of the United States Government (see 32.803(d)).

No-setoff commitment, as used in this subpart, means a contractual undertaking that, to the extent permitted by the Act, payments by the designated agency to the assignee under an assignment of claims will not be reduced to liquidate the indebtedness of the contractor to the Government.

[ 48 FR 42328 , Sept. 19, 1983, as amended at 60 FR 49730 , Sept. 26, 1995; 66 FR 2132 , Jan. 10, 2001]

32.802 Conditions.

Under the Assignment of Claims Act, a contractor may assign moneys due or to become due under a contract if all the following conditions are met:

( a ) The contract specifies payments aggregating $1,000 or more.

( b ) The assignment is made to a bank, trust company, or other financing institution, including any Federal lending agency.

( c ) The contract does not prohibit the assignment.

( d ) Unless otherwise expressly permitted in the contract, the assignment—

( 1 ) Covers all unpaid amounts payable under the contract;

( 2 ) Is made only to one party, except that any assignment may be made to one party as agent or trustee for two or more parties participating in the financing of the contract; and

( 3 ) Is not subject to further assignment.

( e ) The assignee sends a written notice of assignment together with a true copy of the assignment instrument to the—

( 1 ) Contracting officer or the agency head;

( 2 ) Surety on any bond applicable to the contract; and

( 3 ) Disbursing officer designated in the contract to make payment.

32.803 Policies.

( a ) Any assignment of claims that has been made under the Act to any type of financing institution listed in 32.802(b) may thereafter be further assigned and reassigned to any such institution if the conditions in 32.802(d) and (e) continue to be met.

( b ) A contract may prohibit the assignment of claims if the agency determines the prohibition to be in the Government's interest.

( c ) Under a requirements or indefinite quantity type contract that authorizes ordering and payment by multiple Government activities, amounts due for individual orders for $1,000 or more may be assigned.

( d ) Any contract of a designated agency (see FAR 32.801), except a contract under which full payment has been made, may include a no-setoff commitment only when a determination of need is made by the head of the agency, in accordance with the Presidential delegation of authority dated October 3, 1995, and after such determination has been published in the Federal Register. The Presidential delegation makes such determinations of need subject to further guidance issued by the Office of Federal Procurement Policy. The following guidance has been provided: Use of the no-setoff provision may be appropriate to facilitate the national defense; in the event of a national emergency or natural disaster; or when the use of the no-setoff provision may facilitate private financing of contract performance. However, in the event an offeror is significantly indebted to the United States, the contracting officer should consider whether the inclusion of the no-setoff commitment in a particular contract is in the best interests of the United States. In such an event, the contracting officer should consult with the Government officer(s) responsible for collecting the debt(s).

( e ) When an assigned contract does not include a no-setoff commitment, the Government may apply against payments to the assignee any liability of the contractor to the Government arising independently of the assigned contract if the liability existed at the time notice of the assignment was received even though that liability had not yet matured so as to be due and payable.

[ 48 FR 42328 , Sept. 19, 1983, as amended at 60 FR 49730 , Sept. 26, 1995; 61 FR 18921 , Apr. 29, 1996]

32.804 Extent of assignee's protection.

( a ) No payments made by the Government to the assignee under any contract assigned in accordance with the Act may be recovered on account of any liability of the contractor to the Government. This immunity of the assignee is effective whether the contractor's liability arises from or independently of the assigned contract.

( b ) Except as provided in paragraph (c) below, the inclusion of a no-setoff commitment in an assigned contract entitles the assignee to receive contract payments free of reduction or setoff for—

( 1 ) Any liability of the contractor to the Government arising independently of the contract; and

( 2 ) Any of the following liabilities of the contractor to the Government arising from the assigned contract:

( i ) Renegotiation under any statute or contract clause.

( ii ) Fines.

( iii ) Penalties, exclusive of amounts that may be collected or witheld from the contractor under, or for failure to comply with, the terms of the contract.

( iv ) Taxes or social security contributions.

( v ) Withholding or nonwithholding of taxes or social security contributions.

( c ) In some circumstances, a setoff may be appropriate even though the assigned contract includes a no-setoff commitment, e.g.—

( 1 ) When the assignee has neither made a loan under the assignment nor made a commitment to do so; or

( 2 ) To the extent that the amount due on the contract exceeds the amount of any loans made or expected to be made under a firm commitment for financing.

32.805 Procedure.

( a ) Assignments.

( 1 ) Assignments by corporations shall be—

( i ) Executed by an authorized representative;

( ii ) Attested by the secretary or the assistant secretary of the corporation; and

( iii ) Impressed with the corporate seal or accompanied by a true copy of the resolution of the corporation's board of directors authorizing the signing representative to execute the assignment.

( 2 ) Assignments by a partnership may be signed by one partner, if the assignment is accompanied by adequate evidence that the signer is a general partner of the partnership and is authorized to execute assignments on behalf of the partnership.

( 3 ) Assignments by an individual shall be signed by that individual and the signature acknowledged before a notary public or other person authorized to administer oaths.

( b ) Filing. The assignee shall forward to each party specified in 32.802(e) an original and three copies of the notice of assignment, together with one true copy of the instrument of assignment. The true copy shall be a certified duplicate or photostat copy of the original assignment.

( c ) Format for notice of assignment. The following is a suggested format for use by an assignee in providing the notice of assignment required by 32.802(e).

Notice of Assignment

TO: __________ [ address to one of the parties specified in 32.802(e) ].

This has reference to Contract No. ______ dated ______, entered into between ________ [ contractor's name and address ] and ________ [ government agency, name of office, and address ], for ________ [ describe nature of the contract ].

Moneys due or to become due under the contract described above have been assigned to the undersigned under the provisions of the Assignment of Claims Act of 1940, as amended, ( 31 U.S.C. 3727 , 41 U.S.C. 6305 ).

A true copy of the instrument of assignment executed by the Contractor on ________ [ date ], is attached to the original notice.

Payments due or to become due under this contract should be made to the undersigned assignee.

Please return to the undersigned the three enclosed copies of this notice with appropriate notations showing the date and hour of receipt, and signed by the person acknowledging receipt on behalf of the addressee.

Very truly yours,

[ name of assignee ]

[ signature of signing officer

[ title of signing officer ]

[ address of assignee ]

Acknowledgement

Receipt is acknowledged of the above notice and of a copy of the instrument of assignment. They were received at ____ (a.m.) (p.m.) on ________, 20____.

[ signature ]

On behalf of

[ name of addressee of this notice ]

( d ) Examination by the Government. In examining and processing notices of assignment and before acknowleging their receipt, contracting officers should assure that the following conditions and any additional conditions specified in agency regulations, have been met:

( 1 ) The contract has been properly approved and executed.

( 2 ) The contract is one under which claims may be assigned.

( 3 ) The assignment covers only money due or to become due under the contract.

( 4 ) The assignee is registered separately in the System for Award Management unless one of the exceptions in 4.1102 applies.

( e ) Release of assignment.

( 1 ) A release of an assignment is required whenever—

( i ) There has been a further assignment or reassignment under the Act; or

( ii ) The contractor wishes to reestablish its right to receive further payments after the contractor's obligations to the assignee have been satisfied and a balance remains due under the contract.

( 2 ) The assignee, under a further assignment or reassignment, in order to establish a right to receive payment from the Government, must file with the addressees listed in 32.802(e) a—

( i ) Written notice of release of the contractor by the assigning financing institution;

( ii ) Copy of the release instrument;

( iii ) Written notice of the further assignment or reassignment; and

( iv ) Copy of the further assignment or reassignment instrument.

( 3 ) If the assignee releases the contractor from an assignment of claims under a contract, the contractor, in order to establish a right to receive payment of the balance due under the contract, must file a written notice of release together with a true copy of the release of assignment instrument with the addressees noted in 32.802(e).

( 4 ) The addressee of a notice of release of assignment or the official acting on behalf of that addressee shall acknowledge receipt of the notice.

[ 48 FR 42328 , Sept. 19, 1983, as amended at 51 FR 2665 , Jan. 17, 1986; 52 FR 9039 , Mar. 20, 1987; 62 FR 237 , Jan. 2, 1997; 64 FR 10533 , Mar. 4, 1999; 65 FR 24325 , Apr. 25, 2000; 68 FR 56673 , Oct. 1, 2003; 78 FR 37679 , June 21, 2013; 79 FR 24212 , Apr. 29, 2014]

32.806 Contract clauses.

( 1 ) The contracting officer shall insert the clause at 52.232-23, Assignment of Claims, in solicitations and contracts expected to exceed the micro-purchase threshold, unless the contract will prohibit the assignment of claims (see 32.803(b)). The use of the clause is not required for purchase orders. However, the clause may be used in purchase orders expected to exceed the micro-purchase threshold, that are accepted in writing by the contractor, if such use is consistent with agency policies and regulations.

( 2 ) If a no-setoff commitment has been authorized (see FAR 32.803(d)), the contracting officer shall use the clause with its Alternate I.

( b ) The contracting officer shall insert the clause at 52.232-24, Prohibition of Assignment of Claims, in solicitations and contracts for which a determination has been made under agency regulations that the prohibition of assignment of claims is in the Government's interest.

[ 48 FR 42328 , Sept. 19, 1983, as amended at 51 FR 2665 , Jan. 17, 1986; 60 FR 49730 , Sept. 26, 1995; 61 FR 18921 , Apr. 29, 1996]

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What is an Assignment of Claims?

The Assignment of Claims Act (ACA) was passed in 1940 and is codified in 31 U.S.C. § 3727 and 41 U.S.C. § 6305. The ACA allows contractors to assign their rights to receive payment from a federal contract to a third party, called an assignee, who then collects the funds from the government. The ACA’s main purpose is to help contractors and subcontractors access capital by allowing them to monetize their accounts receivable from the government.  What is an Assignment of Claims?

A contractor can assign a contract’s payments to a financing institution if the following conditions are met:

• The contract is for $1,000 or more
• The assignment is made to a bank, trust company, or other financing institution, including a federal lending agency
• The contract doesn’t prohibit the assignment
• The assignment covers all unpaid amounts unless the contract permits otherwise 

The ACA also defines how lenders and factoring companies can arrange for payments when federal contracts are part of a contractor’s loans or accounts receivable. When a FACA assignment is in effect, the government is required to make contract payments directly to the designated bank or financial institution. 

Read more about Assignment of Claims

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48 CFR § 52.232-23 - Assignment of Claims.

As prescribed in 32.806(a)(1) , insert the following clause:

(a) The Contractor, under the Assignment of Claims Act, as amended, 31 U.S.C. 3727 , 41 U.S.C. 6305 (hereafter referred to as the Act ), may assign its rights to be paid amounts due or to become due as a result of the performance of this contract to a bank, trust company, or other financing institution, including any Federal lending agency . The assignee under such an assignment may thereafter further assign or reassign its right under the original assignment to any type of financing institution described in the preceding sentence.

(b) Any assignment or reassignment authorized under the Act and this clause shall cover all unpaid amounts payable under this contract , and shall not be made to more than one party, except that an assignment or reassignment may be made to one party as agent or trustee for two or more parties participating in the financing of this contract .

(c) The Contractor shall not furnish or disclose to any assignee under this contract any classified document (including this contract) or information related to work under this contract until the Contracting Officer authorizes such action in writing .

Alternate I (APR 1984). If a no-setoff commitment is to be included in the contract (see 32.801 and 32.803(d) ), add the following sentence at the end of paragraph (a) of the basic clause:

Unless otherwise stated in this contract , payments to an assignee of any amounts due or to become due under this contract shall not, to the extent specified in the Act, be subject to reduction or setoff.

Assignment of Benefits vs Direction to Pay vs Assignment of Policy

Assignment of Benefits vs. Assignment of Policy

Assignment of Benefits forms, also known as AOBs, play a crucial role in the restoration industry’s contractor-client dynamics. These legal documents empower policyholders to transfer their insurance policy benefits to a third party, effectively connecting their restoration contractor directly to their insurance company. By doing so, policyholders can bypass many of the complications and anxieties typically associated with a restoration project, streamlining the process.

According to Josh Ehmke, Co-owner and General Consult at One Claim Solution , there’s a  common misunderstanding between assignment of benefits and assignment of policy. An assignment of policy refers to the transfer of the benefits and rights of an insurance policy from one party (the policyholder) to another party (the assignee).

“An assignment of policy is never going to be valid. In fact, I haven’t come across a state that allows an assignment of an insurance policy without the insurance company’s prior written consent,” Josh said. “The reason it’s not allowed is because it’s against public policy. It increases the insurance risk substantially.”

For example, a policyholder might have a history of filing numerous claims against their insurance provider, suggesting a pattern that they might be well-versed in exploiting certain loopholes and taking advantage of insurance companies. Additionally, there are concerns that they may not adequately maintain or safeguard their property, leading to an increased risk for the insurance company. 

“That is absolutely different from an assignment of benefits, which grants the rights the policyholder had to the payment under the policy to be transferred to the assignee,” Josh said. ”The only prerequisite for an assignment of benefits other than having a covered claim, is that the loss has already occurred. If you get an assignment of benefits before the loss occurs, that’s essentially a transfer of a policy.”

OCS recently encountered a case where the question arose regarding the scope of an assignment of benefits. Specifically, the issue was whether only the rights of the policyholder are transferred, or if the policyholder’s obligations are also transferred alongside the benefits under the assignment.

“By taking the assignment, the contractor doesn’t assume the policyholder’s obligations under that policy,” Josh said. “It’s very important to word your assignment of benefits appropriately to clearly state that you’re not agreeing to assume any of those policy obligations, and to specify which rights you want.”

Direction to Pay vs. Assignment of Benefits

Direction to pay (DTP) is a financial arrangement where the policyholder, who is entitled to receive an insurance claim payment, instructs the insurance company to pay the claim proceeds directly to a third party. This third party could be a vendor, contractor, service provider, or any other entity to whom the policyholder owes a debt or has entered into an agreement.

“The issue with direction to pay is that the carrier doesn’t have to honor it because it’s not enforceable,” Josh said. “It’s very limited in what it can do, whereas an assignment of benefits is much more powerful because it obligates the insurance company legally to pay you.”

According to Josh, DTP’s are rarely used, except in states like Texas and Florida where AOBs are detrimental to contractors or illegal.

“A DTP is better than nothing and allows you to at least show the carrier that the homeowner granted approval to request payment,” Josh said. “But outside of those situations, the direction to pay in my mind is worthless. When you can have an assignment of benefits, there’s no reason to have a direction to pay at all.”

A Final Word

Understanding the differences between an AOB, Assignment of Policy, and DTP is crucial because each term represents distinct legal and financial arrangements that can significantly impact insurance claims and policyholder rights. To learn more about the value of assignment of benefits in helping you navigate the restoration process, be sure to subscribe to our newsletter .

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Welcome! I’m Alisha, and I’m here to champion your success as the Director of Contractor Success at One Claim. With a passion for helping contractors thrive, I bring a wealth of experience in onboarding, customer service, and account management to ensure your journey with us is nothing short of exceptional.

Prior to joining One Claim, I had the privilege of scaling SMB and Enterprise Customer Success teams at fast-growing SaaS startups. With over six years of experience at companies like Mavenlink, Teamwork, and ServiceTitan, I honed my expertise in building high-performing teams and fostering proactive, consultative relationships. This background has equipped me with a deep understanding of the challenges faced by businesses like yours, and I’m dedicated to helping you overcome them.

Hi there, my name is Eric! I am the Chief Technology Officer here at OCS, spearheading our technical strategy. I have a background in computer science, graduating cum laude from BYU-Idaho with a Bachelor’s degree in Computer Information Technology.

Before coming to One Claim, I served as the Director of Engineering at Slingshot Technology, Inc., a company later acquired by WorkWave in 2021. My professional journey has spanned both emerging startups and established corporations, with a steadfast focus on cultivating high-trust, low bureaucracy teams and innovating technology using agile methodologies.

In my free time, you can find me flying drones, enjoying the outdoors, and spending time with my family.

Hello, my name is Cam, I’m the COO of One Claim Solution! I come from a management consulting background (Bain & Company) and hold an MBA from the University of Michigan. I have worked at a wide variety of organizations, from Fortune 500 to small-cap, in an equally wide variety of industries. I have over 15 years of experience in operations and strategic growth, and I have spent much of my career focused on developing high-performing tech-enabled service organizations through early stage and high growth phases.

Outside of work, my wife Brittny and I have four kids, ages 13 to 6. As residents of Mesa, Arizona, we love to ski and explore the national parks of the southwest!

Hello, my name is Dan, and I am the CEO of One Claim Solution. I am super excited by everything we are doing at OCS to be the market leading insurance billing specialist that advocates on behalf of our restoration contractors. 

My professional experiences are predominantly corporate in nature. My career started at General Electric in finance and accounting. Immediately prior to joining OCS, I spent time as an investor at Bondcliff Partners and management consultant with Bain & Company. I also hold an MBA from the Kellogg School of Management at Northwestern University and got my BS in finance and accounting from Northeastern University.

Outside of the office, I enjoy spending time with my wife, two young children, and our family dog, Whiskey. We live in Charleston, SC and take advantage of the beautiful weather by spending as much time as possible outside at the beach or adventuring around town

Co-Founder and General Counsel

Hi, I’m Josh! In 2016, I co-founded One Claim Solution with my partner Jeremy Traasdahl, and I serve as General Counsel of One Claim Solution. Working in the restoration industry, Jeremy and I saw contractors struggling to get paid quickly and fairly and we knew there was a need for change. We founded One Claim Solution to be this change and it’s been my privilege to see our company grow and to advocate for our clients as general counsel.

Outside of my passion for helping the restoration industry, I enjoy spending time outdoors, fly-fishing, hunting, skiing, and coaching my kids’ baseball teams. I’ve been married to my amazing wife for 20 years and we have a beautiful family of 5 children.

Jeremy Traasdahl

Hey, I’m Jeremy! In 2016, I co-founded One Claim Solution with my partner Josh Ehmke. Working in the restoration industry, Josh and I saw contractors struggling to get paid quickly and fairly and we knew there was a need for change. We founded One Claim Solution to be this change and it’s been my privilege to lead our amazing team.

Prior to One Claim Solution, I started my career as an inside sales rep for Avnet, then moved to Pepsico as a district sales manager. Outside of work, I love spending time with my wife and four children, two boys and two girls!

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What Is an Assignment of Claims?

An assignment of claims is a legal and financial process that allows one party to transfer or “assign” a claim to someone else, provided that the other party is in full knowledge of the assignment and agrees to it. In this process, the party that transfers the claim is called the assignor, and the party to whom the claim is transferred is called the assignee. Essentially, this situation entitles the assignee to the rights previously held by the assignor, according to the claim or contract. The assignment of claims, however, may also involve transference of some liabilities and legal responsibilities to the assignee.

There are many situations wherein assignment of claims can be applicable, such as in insurance claims, bankruptcies, and damages to compensate for an accident or injury. In the US, companies abide by the “Assignment of Claims Act of 1940” to carry out an assignment of claim when a contract between the said company and a client expires or is about to expire. One condition under the act is that there is a sum of $1,000 US Dollars or higher involved in the contract; if the sum is lower than that, then an assignment may not be able to push through.

The company may only assign the claim to an assignee of a “financing institution,” like banks, government-funded lending agencies, or trust companies or corporations. This condition ensures that the assignee is able to take on the responsibilities involving the claim, especially for financial aspects. The existing contract between the assignor and another party should also not state any problem with assigning the claim to a new assignee; otherwise, the party with whom the assignor has a contract can sue the assignor for contract violation. Another condition would be that the assignor can only assign the claim to only one assignee, and that the latter cannot transfer the claim to another party.

Many cases require that the assignment be formally filed, especially when it involves property of high value, such as a huge sum or money, land, or forms of collateral . Generally, the courts do not have to investigate why an assignment was filed, but require the filing primarily for documentation purposes. In this process, another contract should be drawn up, stating that the claim will be transferred from the assignor to the assignee. Once the contract is agreed to and the two parties have willingly signed the contract, the assignment of claims is complete and a novation takes place, making the assignee the new claim holder.

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Assignment of claims: Are there any constraints to assigning claims or seeking cost guarantees?

June 18, 2019 > > Litigation & Dispute Resolution

IR Global | View firm profile

The following article discusses session three in the IR Global Virtual Series on 'Litigation Funding: Handling commercial and financial disputes

Germany – FW The assignment of claims to a third party for the purpose of their recovery is allowed without further ado, if the assignee bears the full financial risk of recovering the claims and acts for his own account (e.g. factoring).

If an assignee collects debts for the account of the assignor and if the debt collection is conducted as a stand-alone business, this is considered a collection service (Inkassodienstleistung) under the Legal Services Act (Rechtsdienstleistungsgesetz).

Pursuant to the latter, persons who provide such collection services (collection service providers) have to seek the permission of competent authorities and have to be registered with the Legal Services Register (Rechtsdienstleistungsregister). The assignment of claims to a collection service provider which is not registered is null and void; the unauthorised collection service provider lacks the capacity to sue.

With regard to certain types of litigation, e.g. consumer actions, the assignment of claims (to registered collection service providers) is common. In general, such assignments appear reasonable to pool small claims in order to benefit from synergy effects and to create a certain ‘balance of power’ vis-à-vis more financially powerful counter-parties. With regard to bigger claims, however, litigation funding will usually be the better, or even only, option to get financial support from third parties.

Spain – DJ The situation is similar in Spain, because the Spanish civil courts were inspired by the Napoleonic French Code. A lot of opportunistic funds arrived in Spain following the economic crisis, to buy bad credits and assets from banks. This has led to a lot of assignments of claims and the courts have established that they are valid and enforceable.

France – MCC Contractual assignment of claims is valid under French law with a condition and a limit. As a condition, the claim has to be fundamentally legitimate and conform to the public order. The debtor’s consent is not required unless the right was provided to be non-assignable.

Unless the debtor has already agreed to it, the assignment may be set up against him only if it was previously served to him by a Bailiff, or he has acknowledged it. The debtor may set up against the assignee defences inherent to the debt itself, such as nullity, the defence of non-performance, termination or the right to set off related debts.

He may also set up defences which arose from the relations with the assignor before the assignment became enforceable against him, such as the grant of a deferral, the release of a debt, or the set-off of debts which are not related. The assignor and the assignee are jointly and severally liable for any additional costs arising from the assignment which the debtor did not have to advance. Subject to any contractual term to the contrary, the burden of these costs lies on the assignee.

As a limit, if the claim subject to assignment is litigious, the debtor may obtain a release from the assignee by reimbursing him the actual price paid for the assignment, plus costs and reasonable expenses, plus interest calculated from the date on which the assignee paid the price of the assignment made to him. The claim then disappears.

Because of this rule called ‘retrait litigieux’, assignees have to be very careful and research what happened before the assignment.

US – ES There is no prohibition in the US against assigning a claim, or part of a claim, to a third party, but, of course, any third party taking an assignment of all or part of the claim is subject to all potential offsets and defences that exist against the primary holder of the claim.

Assigning claims is done fairly often, mostly in the intellectual property patent world. Patent trolls are big in the US, buying up patent claims and aggressively litigating and pursuing those claims.

Sweden – DE Almost any claim can be assigned in Sweden, the main rule is that the original claimant must have initiated a lawful claim, then it can be assigned. Claims based on unlawful contracts (Pactum Turpe) can neither be enforced by the first holder of the claim, nor its successor. Apart from that, there are no restrictions of any kind, or any constraints to assigned claims.

As far as cost guarantees are concerned, we have the same situation as any other European country in that EU citizens or companies founded in another country within the EU cannot be forced to provide a guarantee for legal costs in litigation proceedings in Sweden.

The same applies for claimants in a country that has entered into an international agreement with Sweden, such as The Hague Convention.

Austria – KO If you are representing a client from outside the EU, the opponent may ask the court to order a cost deposit covering all the procedural costs of the defendant.

US – ES Is there a limit on that?

Austria – KO No, if you have a multi million-dollar dispute, your client pays the court fees of 1.2 per cent, plus also the estimated court-related fees including legal fees for the defendant. The policy is clear – if someone is suing us from somewhere in the world and we, as a defendant in Austria, end up winning the case, we might not be able to enforce our cost award against this claimant. As a result, there is an interest of security deposit which has to be paid upon request by a claimant outside the EU.

US – ES Do you find that a successful application by a defendant to require a large security deposit will often end a case?

Austria – KO Yes, it’s one of the best strategies to fend off a claimant or to make them reduce the claim, and a common strategy for the defendant’s lawyer to ask for a huge security deposit. It’s at the discretion of the judge, but overall you will have to deposit a huge amount of money to get the case going. There is discussion going on about legislation to reduce that, but there are two interests to be weighed against each other.

It’s another argument for why third-party funding can be crucial to get cases going.

As to assignments, one single action containing several claims is permitted if the claims get assigned to another legal entity; such legal entity acts as the sole claimant if the claims rely on the same or similar legal and factual basis. The concept has been approved by the Supreme Court.

Hong Kong – NG An order for security for costs in litigation offers protection to a party from the risk of their opponent not being able to pay the party’s litigation costs if ordered to do so.

Applications for security for costs are a common feature of civil litigation before the first-instance courts in Hong Kong. Sometimes liability for security for costs and the amount can be agreed between the parties. As for the form of the security for costs, the most common method to give security is to make a payment into court. Other methods included an undertaking to pay, a bond, a bank guarantee or a charge.

Despite their abolition in some other common law jurisdictions, the crimes and torts of maintenance and champerty are still part of Hong Kong law. Third party funding is considered to infringe the doctrines of champerty and maintenance, so it is not generally permitted for litigation in the Hong Kong courts (except for specific cases).

Litigation funding is allowed in some insolvency cases, because debtors often siphon away assets when insolvent, yet liquidators or trustees in bankruptcy often find themselves without sufficient funds to recover assets or pursue other legitimate claims in the name of the debtor.

In light of this, the Hong Kong law has accepted litigation funding arrangements as a legitimate practice in liquidation proceedings. Such arrangements may include the sale and assignment by a liquidator or trustee in bankruptcy, of an action commenced in the bankruptcy, to a purchaser for value.

As far as arbitration is concerned, the Arbitration Ordinance or AO (Cap. 609) has recently been amended, such that the common law tort and offence of champerty and maintenance no longer apply to third party funding of arbitration and mediation.

Under the AO, a Code of Practice sets out the standards with which third party funders are ordinarily expected to comply in connection with arbitration funding. It states the requirements for funding agreements, the minimum amount of capital a third-party funder is required to have, the procedure for addressing conflicts of interest and whether third party funders will be liable to funded parties for adverse costs.

Contributors

Klaus Oblin (KO) Oblin Melichar – Austria www.irglobal.com/advisor/dr-klaus-oblin

Marie-Christine Cimadevilla (MCC) Cimadevilla Avocats – France www.irglobal.com/advisor/marie-christine-cimadevilla

Daniel Jimenez (DJ) SLJ Abogados – Spain www.irglobal.com/advisor/daniel-jimenez

Erwin Shustak (ES) Shustak Reynolds & Partners – US – California www.irglobal.com/advisor/erwin-shustak

Nick Gall (NG) Gall Solicitors – Hong Kong www.irglobal.com/advisor/nick-gall

Dan Engström (DE) Advokatfirman Nova AB – Sweden www.irglobal.com/advisor/dan-engstrom

Florian Wettner (FW) METIS Rechtsanwälte – Germany www.irglobal.com/advisor/florian-wettner

More from IR Global

Legal development

What's in an assignment - are pre-existing claims included

08 May 2023

What you need to know

• Ordinarily, a party's personal right to sue another party (a 'bare right of action') is not assignable to an unrelated third party.
• One exception to this general rule is if the assignee has a genuine and substantial interest, or a genuine commercial interest, in enforcing the claim to be assigned that is separate or distinct from the assignment itself.
• In Billabong Gold Pty Ltd v Vango Mining Ltd [No 2] [2023] WASCA 58, the WA Court of Appeal held that the commercial interest supporting the assignment of a right of action need not be 'pre-existing' at the time of assignment.  What is required is that the interest be distinct from the assignment itself, not that it necessarily predate it.
• This decision clarifies earlier cases which seemed to suggest that the separate commercial interest needed to predate the assignment.

What you need to do 

• Parties looking to take an assignment of rights under a contract should carefully consider whether any pre-existing or potential claims connected with that contract (for example, for breaches that may have occurred) will be included in and are enforceable following the assignment.
• Assignees need to ensure the assignment falls into one of a number of well‑recognised categories of cases which are exceptions to the general rule prohibiting the assignment of a bare right of action.
• Counterparties to contracts which have been assigned should carefully consider whether assignees looking to enforce claims arising in respect of the relevant contract before the assignment can do so.

Executive Summary

Subject to limited and defined exceptions, the law does not usually permit a party to assign a 'bare right of action' to another party.  For example, where Party B breaches the terms of its contract with Party A, Party A cannot usually assign to a third party (Party C) its right to sue Party B for unliquidated compensatory damages for that breach.  This prohibition is presently justified by the public policy interest of avoiding otherwise unrelated and uninterested third parties meddling in litigation and propagating disputes. 

One of the well-recognised exceptions to this prohibition arises where the purported assignee of the right of action (i.e. Party C) can establish that it has a genuine and substantial interest, or a genuine commercial interest, in enforcing the claim to be assigned (with that interest being distinct and separate from the interest merely derived from the assignment itself).  In that situation, Party C is not an unrelated or uninterested third party and the policy reasons justifying the prohibition against assignment do not arise. 

Against that background, WA's Court of Appeal in Billabong Gold Pty Ltd v Vango Mining Ltd [No 2] [2023] WASCA 58 ( Billabong Gold ) concluded that the relevant commercial interest did not need to arise or exist prior to the assignment.  This decision suggests broader availability of the ability to assign rights of action, and should be borne in mind by parties taking assignments of contracts where there may be existing or potential claims or causes of action connected with those contracts that have not yet been made or litigated.  

Dispute Between Billabong and Vango

In the primary proceedings, Billabong Gold Pty Ltd ( Billabong ) sued Vango Mining Ltd ( Vango ) and Dampier (Plutonic) Pty Ltd  ( Dampier ) in relation to alleged breaches of an Ore Treatment Agreement dated 23 September 2014 ( OTA ).  

Importantly, Billabong was not a party to the OTA when it was formed.  Rather, the OTA was originally between Northern Star Resources Ltd ( Northern Star ), on the one hand, and, on the other hand, Vango and Dampier who were joint venture partners under the Plutonic Dome JV.  The Plutonic Dome JV held a number of tenements, including tenements from which gold was produced at a deposit.  The OTA relevantly granted Northern Star a 'right of first refusal' in relation to any transfer of the tenements subject to the Plutonic Dome JV. 

On 11 May 2016, Vango and Dampier executed an agreement under which Vango agreed to acquire all of Dampier's interest in the tenements held by the Plutonic Dome JV ( May 2016 Vango/Dampier Sale Agreement ). 

On 12 August 2016, Northern Star entered into an asset sale and purchase agreement with Billabong ( Billabong Sale and Purchase Agreement ) under which Northern Star agreed to sell its gold mining operations, including its tenements, to Billabong.  As part of this process, Northern Star and Billabong also entered into a General Deed of Assignment and Assumption dated 11 October 2016 ( Billabong Assignment Deed ) which included an assignment by Northern Star to Billabong of its rights under the OTA. 

Subsequently, on 24 August 2016, Vango acquired all of the shares in Dampier, and Dampier became a wholly owned subsidiary of Vango.

Relevantly, two important questions arose in the primary proceedings:

• Did Vango and Dampier breach the right of first refusal clause under the OTA by failing to give Northern Star the option to acquire the tenements the subject of the May 2016 Vango/Dampier Sale Agreement; and
• if so, did the Billabong Assignment Deed assign Northern Star's right to sue for that breach of the OTA to Billabong? 

With respect to those two questions, the trial judge found that: 

• Vango/Dampier breached the right of first refusal clause by failing to provide offers for the transfer of tenements to Northern Star; and
• that cause of action in favour of Northern Star arising from that breach was a 'bare right of action' which was not assignable to Billabong as Billabong had no genuine commercial interest in enforcing the right of action for this breach of contract.  

Billabong appealed and the right of action was held to be assignable

On appeal, among other things, Billabong challenged the primary judge's conclusion that Northern Star's right of action in respect of Vango/Dampier's breach of the first refusal clause under the OTA could not be assigned to Billabong by the Billabong Assignment Deed. 

The Court's analysis of the principles concerning the assignability of a 'bare right of action'

The Court commenced its analysis by noting that the rule prohibiting the assignment of bare rights of action is justified by the public policy notions related to the doctrines of maintenance and champerty.  Maintenance refers to an unconnected third-party assisting to maintain litigation, commonly by providing financial assistance.  Champerty is a form of maintenance whereby the third-party provides financial assistance in return for a share of the proceeds. 

(It is worth noting that legal causes of action are assignable at law under s 20 of the Property Law Act 1969 (WA) and its equivalents in the other States.  However, a bare right of action is not considered to be a legal chose in action, even though it is sometimes confusingly referred to as one.)

A number of well-recognised exceptions to this general rule were then identified.  

• First, a right of action can be assigned if it is annexed to or ancillary to a property right being assigned. 
• Secondly, the rule does not apply if the assignee of the subsisting cause of action itself has a genuine and substantial interest, or a genuine commercial interest, in enforcing the claim that is otherwise distinct or separate from the interest merely derived from the assignment itself.  The requirement that the commercial or other interest be 'distinct or separate' exists because, were it otherwise 'the exception would swallow the rule because the assignment itself would always provide the commercial interest'. 
• Thirdly, there is no prohibition on an assignee taking an assignment of a cause of action to support and enlarge a right already acquired. 
• Fourthly, where the benefit of a contract is assigned, there is no impediment to the assignee pursuing a cause of action for breach which has occurred after the date of assignment.

Does the relevant commercial interest need to pre-exist at the time of assignment?

The appeal was focussed on the second exception.  The Court noted that in every case, the totality of the transaction must be considered and the concept of a genuine commercial interest is to be applied in a broad and practical way.  

The Court looked at a number of earlier cases which appeared to suggest that the relevant commercial interest must exist prior to the assignment.  

The Court found there was no such requirement and set out five reasons why the commercial interest need not pre-date the assignment.

• First, the need for a pre‑existing commercial interest does not appear to have been established by the High Court of Australia in Equuscorp Pty Ltd v Haxton [2012] HCA 7.  Equuscorp was authority for the proposition that the relevant commercial interest can at least arise contemporaneously with the assignment at issue.
• Secondly, this question had been left open by the New South Wales Court of Appeal in the earlier case of Bakewell v Anchorage Capital Master Offshore Ltd [2019] NSWCA 199. 
• Thirdly, a number of other earlier authorities only concluded that the supporting commercial interest needed to be distinct or separate from the interest acquired under the assignment itself. While this requirement is usually satisfied in circumstances where that commercial interest pre-dates the assignment, that did not constitute a strict legal criterion in itself.
• Fourthly, the Court reviewed persuasive authority from the United Kingdom's House of Lords and concluded that the approach adopted in that jurisdiction did not require that the supporting commercial interest be pre-existing. 
• Fifthly, and finally, the Court concluded that nothing in the policy justification of the rule, being the avoidance of trafficking in litigation, required that the relevant commercial interest always predate the assignment.    

For those reasons, the court held that the relevant commercial interest need not be pre-existing to the assignment of the cause of the action.  

In any event, Billabong had a 'sufficient commercial interest' to justify assignment of Northern Star's right of action for breach of the OTA

Notwithstanding the analysis outlined above, the Court also concluded that, in any event, Billabong did hold a pre-existing commercial interest sufficient to support the assignment of the causes of action for breach of the OTA.  

In summary, this was because the Billabong Sale and Purchase Agreement (which was dated 12 August 2016 and pre-dated the Billabong Assignment Deed, which was dated 11 October 2016) gave Billabong a genuine and substantial interest or a genuine commercial interest in enforcing the relevant breaches of the OTA, beyond the assignment of the OTA itself.

Implications for contracting parties

This decision is relevant to parties taking assignments of contracts (or who are counter-parties to a contract under which rights are being assigned) where there may be existing or potential claims or causes of action connected with those contracts that have not yet been made or litigated.  

Parties looking to take an assignment of rights under a contract should actively consider whether the proposed assignment will include rights to sue or enforce pre-existing or potential claims under or in connection with the contract.

Unless the rights fall into one of a number of well‑recognised categories of cases which are exceptions to the general rule prohibiting the assignment of a bare right of action, the rights will not 'follow the assignment'. 

In cases where the proposed assignee is looking to rely on the exception involving a separate and distinct commercial interest in suing or enforcing the claim, this decision helpfully confirms that a pre-existing commercial interest is not strictly required. 

On the other hand, counterparties to contracts which have been assigned who are facing claims by the assignee should carefully consider whether the assignee can still enforce or sue on such claims, especially in respect of claims which arose before the assignment occurred.

One final point

As the Court of Appeal noted, the rule prohibiting the assignment of bare rights of action has historically been justified by the public policy notions related to the doctrines of maintenance and champerty.  

For those State jurisdictions where the tort of maintenance and champerty have been abolished (including, recently, Western Australia by virtue of s 36 of the Civil Procedure (Representative Proceedings) Act 2022 (WA) although the abolishment only applies to causes of action accruing after the provision came into operation), the underlying justification has now fallen away.  

It remains to be seen whether courts will revisit the continued application of the rule prohibiting the assignment of bare rights of action.  If the rule is also abolished, it will remove the need for contracting parties to grapple with the complexities of the exceptions to the rule.     

Authors:  Adrian Chai, Partner; Charles Dallimore, Senior Associate and Max Evangelisti, Graduate.

The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying it to specific issues or transactions.

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Assignment of Claim after a Loss: What Homeowners Should Know

Let’s start with the basics. If you, as a homeowner, sustain property damage or losses because of a covered event (like a fire, for example), you will need your home repaired. You choose a contractor or restoration company to do the work – but the check from the insurance company has not come through yet, and you need them to start right away. So, what can you do?

You can sign an “assignment of claim,” which assigns your rights (as the policyholder) to benefits and proceeds from the loss, to the company or contractors. In the simplest of terms, the assignment of claim allows your contractor to get paid directly from the insurance company.

What is the anti-transfer clause in insurance?

However, many contractors and purchasers of the damaged property have found themselves in a tight spot over the years, because of something called the anti-transfer clause. As explained on the Tennessee Insurance Litigation Blog ,  the anti-transfer clause usually reads something like this: “Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.” Sometimes, the insurance company requires written consent before an assignment of claim can be made.

This clause routinely allows insurers to deny payments to contractors – but it shouldn’t, when an assignment of claim is made post-loss.

What’s the difference between pre-loss vs. post-loss assignments?

The Courts of Tennessee have routinely ruled on behalf of contractors and purchasers who were assigned the claim after the loss occurred. That is because the original assignee – the homeowner – was approved by the insurance company in the first place, and because the damage occurred regardless. There was no additional risk for the insurance company. Therefore, even if the contractor has a long and storied history of rule-breaking (or even criminal activity), the homeowner can assign the claim however he or she chooses; after all, the loss already happened.

Where insurance companies can (and do) have a leg up is for pre-loss assignments. The insurance company underwrote the risk on Bob and Jane Homeowner because it felt confident enough to do so. Bob and Jane cannot assign their policy to another person without the approval of the insurer, even when no loss has occurred.

Even if there is an anti-transfer clause in your policy, the chances are very good that a post-loss assignment cannot be legally denied by your insurer. If it is, seek out an experienced insurance dispute lawyer to help you argue the denial.

One last note for Tennessee policyholders

In some cases, the insurance company may decide that the amount of your loss is worth less than the cost of the renovations for which the contractor is charging. If this happens, you could be on the hook for the remainder of the costs, depending, of course, on the language of the deal with your contractor.

Because of this risk, it’s wise to contact an attorney before making any decisions. Get informed about your rights from the start, and let your lawyer address any potential hiccups along the way. If your insurer lowballs your claim, your attorney can  handle the dispute , to ensure that you are compensated fairly.

At McWherter Scott & Bobbitt, we have spent years fighting against unfair insurance claims policies in Tennessee and Mississippi. Let  Brandon McWherter ,  Jonathan Bobbitt  and  Clint Scott   put their knowledge and experience to work for you. Please call  731-664-1340 or fill out our  contact form . We maintain offices in Nashville, Chattanooga, Memphis, Jackson and Knoxville.

Brandon McWherter has dedicated his practice to assisting insurance policyholders with their claims against insurance companies, including claims for bad faith. He is licensed in Tennessee, Arkansas, and Mississippi. Learn More

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Types of Claims – assigned and non assigned claims

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Former Toronto Blue Jays Star Prospect Traded Again, Now With Fourth Team This Year

Brady farkas | 20 hours ago.

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• Toronto Blue Jays

Former Toronto Blue Jays star prospect Cavan Biggio is on the move yet again and getting set to join his fourth organization of the season.

Gabe Burns of the Atlanta Journal-Constitution reports that the Braves acquired Biggio from the San Francisco Giants for cash considerations.

Braves acquired Cavan Biggio from Giants. He's on minor league deal.

Braves acquired Cavan Biggio from Giants. He's on minor league deal. — Gabe Burns (@GabeBurnsAJC) September 8, 2024

This move makes sense for the Braves considering they just lost Whit Merrifield (another former Blue Jay) to a broken foot. The team isn't sure yet when he'll be able to return, though he hopes it won't be a long issue.

Biggio was designated for assignment by the Blue Jays earlier this season then traded to the Los Angeles Dodgers. He was let go there, latching on with the Giants before getting dealt to Atlanta. He did not appear in a big-league game for the Giants and is hitting just .197 in 74 games this season.

Biggio has added five homers and 19 RBI. He's got two stolen bases.

The son of Hall of Famer Craig Biggio, Cavan was a fifth-round pick of the Blue Jays back in 2016 out of Notre Dame. He made his major league debut in May of 2019 and was supposed to pair with Vladimir Guerrero Jr. and Bo Bichette to help make up the next great Blue Jays team.

While  Toronto  got to the playoffs in 2020, 2022 and 2023, Biggio never really established himself. He hit 16 homers in his rookie year but never hit more than nine after that. He's a lifetime .225 hitter who hasn't hit above .235 since the COVID-shortened 2020 season.

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BRADY FARKAS

Brady Farkas is a baseball writer for Fastball on Sports Illustrated/FanNation and the host of 'The Payoff Pitch' podcast which can be found on Apple Podcasts and Spotify. Videos on baseball also posted to YouTube. Brady has spent nearly a decade in sports talk radio and is a graduate of Oswego State University. You can follow him on Twitter @WDEVRadioBrady. 

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